More of the same as the equity index ETFs were pushed into the nosebleed section with the S&P 500 gaining seven days in a row before surrendering a jaw dropping 4 points yesterday. Nevertheless, this benchmark is within striking distance of following the Dow by taking out its 2007 high.
So far, this has not been the year of bond ETFs since their offsetting benefit during times of market stress has not been of any value, as the equity indexes marched straight north starting at the post-election November 2012 lows.
It’s a matter of fact some of the bonds/Treasuries such as BND, TIP and TLH have clearly pierced their long-term trend lines to the downside indicating higher rates. While I have kept these in the model ETF portfolios, in my advisor practice we have liquidated them. With the Fed being hell bent on pushing equities into the stratosphere via their open ended QE program, low volatility equity ETFs are simply a better choice until the trend reverses.
Last week, I listed my simple 3 rules for participating in this up trend. For the benefit of new readers, here they are again:
1. Invest only in the most liquid ETFs, such as I recommend in my HighVolume ETF list. When the inevitable trend reversal occurs, the exit doors will get very crowded very quickly and low volume products will produce much more slippage in price.
2. Select ETFs that are low in volatility so that a sudden pullback does not stop you out right away. Good candidates, which we own, are SPLV, XLP and DVY just to name a few.
3. Only invest if you are using trailing sell stops to control downside risk.
Below is the latest update for our Model ETF Portfolios:
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