Greed Can Be Death To Your ETF Portfolio

Exchange traded funds (ETFs) are touted for their transparency, but does transparency matter when fear or greed rules the markets?

Howard Lindzon says people wanted Russia, Brazil, oil, China, coal and agriculture, and all the transparency in the world doesn’t stop any cycle of greed and fear.

People are focused on return of capital not return on capital. Remember not to get caught up in the hype and sell on a panic, and not to jump in just because the bandwagon rolls by. Have a strategy and stick with it, and transparency will matter when you need it.

We agree that one should not chase returns. Our strategy is to rely solely on the trend, and it works. It’s important to not let fear or greed rule your decisions, and investors who just look at the trend line and get out at the appropriate time (when a fund drops below its 200-day moving average or 8% off its high) will fare much better.

Many of the funds that have fallen to lows were high-flyers earlier this year, and a lot of people out there are hurting right now. Investors can protect themselves by understanding risk and having protection on the downside, as well as keeping an eye on areas where there will be opportunities in the future. Many of these areas are down right now, but they will turn around someday and provide the best bargains for investors at that time.

That isn’t to say “get in,” but rather, keep an eye on them. Don’t just ignore what the markets are doing. When they move back above their 200-day moving averages, there will be a number of places for you to go.

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