This year’s small pullback in the market has affected mainly volatile ETFs in the orientation of country, sector and specialty funds. These have been the top performers over the past few months, so it’s no surprise that they are the first ones to correct more sharply.
If you follow a 10% trailing sell stop discipline, the following 13 ETFs have exceeded that point and should not be held. The list below shows the drop off from the high point for each ETF that has exceeded the 10% limit:
TF (-25.69%)
TKF (-23.39%)
IFN (-15.23%)
PXJ (-14.11%)
VDE (-12.97%)
PXE (-12.48%)
FXI (-12.24%)
DBC (-12.06%)
XLE (-11.93%)
IYE (-11.89%)
IXC (-11.80%)
IGE (-11.01%)
IIF (-10.23%)
This list is not all inclusive; it is taken from the 159 most widely held ETFs that I currently track in my data base.
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Comments 7
I am out of FXI, EEM, EEB, IFN and IIF
I think the big run-ups in foreign stocks is a lot like the big run-up in tech stocks a few years ago.
A lot of $100-per-share stocks dropped down to $ 5.00 and $ 10.00.
In the long run, tech stocks and BRIC stocks, I believe, will do well, but it doesn’t look like they are going to do well in the near-term.
I am trying to understand the “10% drop” approach.
When you refer to “drop off the high point” you mean the highest quote ever reached or a “recent” high quote ?
If “recent”, since when ?
FXI had its peak on Jan 3, 2007 ($116.40) and its last quote (Jan 12) was $105.40.
This means a drop of -9.45%. Am I doing this wrong, since you indicated a drop of -12.24% ?
Than you.
Carlos,
Yes, you understand it right. It’s the drop from the highest point of the recent months, or from the time we bought it.
Since the market changes every day, so does this DrawDown number. When I published the above list, those nubmers were correct on that day. Since you looked at them 2 days later, they obviously had changed.
So, your -9.45% figure is correct for that day.
Ulli, some of your clients have asked some tax questions that may affect others. People drawing social security may have to pay tax on their social security if they have a large capital gain or if they withdraw money out of their IRA. IRA withdrawals increase your taxable income, and even if the IRA is redeemed at a loss it is, at best, only deductible as an itemized deduction–and only then if ALL IRAs are redeemed at a loss.
Thanks for sharing that. I’m sure that many retired readers will appreciate your alway timely information.
Ulli, TF, TKF, IFN and IIF technically are not an ETF but CEF.
So there rise and fall may be just because changes in premium/ discount. Do you think that in this cases you rule should work ?
Thanks
Yes, all buy and sell rules work the same for CEFs as they do for no load funds and ETFs.