ETFS 2006: From a 33% Loss to an 81% Gain

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2006 was a year of extremes. In the ETF world, 2 funds ruled on the extreme end, one by superior performance, the other by a devastating loss.

The clear winner was the China fund (FXI) with a yearly gain of about +81%.

While the 1-year chart shows this fund as being in a solid uptrend, it doesn’t tell the entire story. During the market melt-down of May/June 06, this fund dropped -21% off its high. So, if you worked with a recommended sell stop loss of 10%, you would have been out of your positions at that time. Of course, the subsequent market rebound rally would have offered a new entry point.

The loser of the year was the Turkish Investment fund (TKF) with an amazing loss of -33%. During the correction of May/June, this fund had dropped a devastating -51% off its high.

As the 1-year chart above shows, this fund never regained momentum and stayed below its long-term trend line for the remainder of the year.

The point is that no matter which fund you would have picked, a disciplined Buy/Sell strategy would have either kept you in the market on the right track or limited any potential losses from a wrong choice of funds.

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