ETFs With Muscle

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As a regular reader of my weekly StatSheet, you will have noticed the wide discrepancy in performance especially now that all funds and ETFs are ranked based on my M-Index.

Currently, the 2 top performers out of over 1,700 funds/ETFs are FXI (China) and SLX (Steel sector), which have been on an absolute tear not only over the past 4 weeks, but YTD as well. Take a look at a chart comparing the two:

Over the past 4 weeks, FXI and SLX have advanced a strong +13.24% and +19.86% respectively. YTD they are up +55.46% and +68.12%.

Is there more upside potential? While no one has that answer, in my advisor practice we have added both ETFs to our holdings within the last month in conjunction with our clearly defined exit strategy, in case the market turns against us. I invested about 10% of portfolio value each, and I am using a trailing sell stop point of 10%.

That means my risk is, if either ETF declines 10% immediately after my purchase, it will affect the portfolio by a negative 1%. Obviously, this did not happen, and we’re ahead at this moment.

My point is that you can take a position in a strong performer late in the game as long as you identify your exit point at the time of purchase and can live with the consequences if this trade goes against you. It’s a simple risk vs. reward equation.

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