For example, Ned Davis Research produces a market breadth composite of the various S&P 500 segments to analyze each industry’s price level returns, which utilizes multiple technical indicators applied to industries to measure trends, countertrends, and market health. Finally, allocations to specific areas are based on both the composite’s score of market health and the score’s directional trend. The final product is a an investment strategy that has diminished drawdowns during weak periods but it was still able to participate in any upside potential to generate improved long-term, risk-adjusted returns.
“Index provides tactical U.S. equity allocations, and has historically outperformed with less risk,” Schuster said. “Trading into and out of the market tactically has helped improve the risk/return trade off.”
To potentially improve long-term equity investment, investors can look to something like the VanEck Vectors NDR CMG Long/Flat Allocation ETF (NYSEArca: LFEQ). LFEQ can provide investors with an investment solution that offers a systematic approach to preserve capital by increasing cash when market health is weak while participating in uptrends with a full allocation to equity through technical indicators.
The ETF strategy tries to reflect the performance of the Ned Davis Research CMG US Large Cap Long/Flat Index, which follows trade signals that dictates the portfolio’s equity allocation ranging from 100% fully invested or “long” S&P 500 exposure to 100% in cash or “flat” Solactive 13-week U.S. T-Bills.
“LFEQ is designed to efficiently trade into and out of the market automatically for its investors so they do not have to,” Schuster said. “Seeks to track the Index and provide tactical U.S. equity allocations to perform with less drawdown risk.”
Financial advisors who are interested in learning more about a long-term investing strategy can watch the webcast here on demand.