My latest e-book “How to beat the S&P 500…with the S&P 500” has been downloaded literally thousands of times over the past few months. In case you missed it, you can get your free copy here.
This popularity has prompted many questions, especially “which ETFs are most suitable using the Trend Tracking approach as described in the book?”
The answer, according to our back tests, is that slower trending ETFs tend to have better results over the long term due to their reduced volatility. That cuts down on the number of whipsaw signals; those necessary components that help us avoid or minimize participating in the big market drops.
One way I measure ETFs and their volatility is via Maximum DrawDown (MaxDD%) during a given period. Here’s how it’s defined in my Glossary of terms:
“If you were to go back to the beginning of the most recent buy cycle (10/25/2011), as generated by my Domestic Trend Tracking Index (TTI), and measure DD% for a given ETF every trading day, and then select the worst (largest) DrawDown number, you would have the information that I call MaxDD% (Maximum DrawDown Percentage).
This number allows me to look back at anytime and see which ETFs have held up best and never hit our 7.5% sell stop.”
To be clear, that does not guarantee that those ETFs will never drop to their sell stop level— they most certainly will given a bear market environment. But at least in the current time frame they have displayed better resistance to temporary market pullbacks.
Those are the ones that are preferable when using the book’s Trend Tracking approach. I have taken the time to select 10 ETFs that will become a part of the daily commentary. They will be tracked and updated every day.
The new market commentary, effective November 4, will be shortened to contain only market moving news to make room for these ETFs in the spotlight.
I hope you find this new newsletter approach interesting and helpful to you in your own investing.