Tag Archives: etfs

The Risks Of Selling The Rally

Summary Investors that were fortunate to buy into the hole in either August or September have now been rewarded with a double digit gain on most broad-based indices. If you had the tenacity or good luck to buy the dip, you may question the risks of overstaying your welcome on the upside. Below are some bullet points that may provide a road map to making this difficult decision a little easier to digest. Investors that were fortunate to buy into the hole in either August or September have now been rewarded with a double digit gain on most broad-based indices. What began with some skepticism as just a short-covering binge has now morphed into the notion of a full blown recovery. There is even quite a bit of debate on whether or not we could take out the prior all-time highs on the S&P 500 Index before the year is out. Of course, if you had the tenacity or good luck to buy the dip, you may question the risks of overstaying your welcome on the upside. Those that took a more active approach in loading up on stocks near the lows are likely just as leery of a blow off top that ends in a swift and pernicious drop. Below are some bullet points that may provide a road map to making this difficult decision a little easier to digest. Evaluate your time horizon and investment goals. If you are short-term trader with defined risk parameters, then taking off some of your long positions into this run higher may be a prudent decision. It will free up cash to evaluate other opportunities and offer the flexibility to deploy capital when needed. Conversely, long-term investors may not be as concerned with these daily machinations and are willing to ride out additional volatility in order to stick with their plan. Here is a short guide to some of the key differences between being an investor and a trader . Consider making changes in small increments. If you took an above-average risk by loading up on stocks at the lows, then you have more flexibility to bank profits on the way higher. That may include breaking trades up into two or three pieces in order to slowly reduce your stock allocation over time. That way you can still participate in additional upside momentum if the market continues on the current course, but don’t have as much to lose if it turns lower. Don’t count on timing the market perfectly. There was a risk of buying on the way down that the market continues falling even further and compounds your losses. Similarly, there is an even greater risk that selling on the way up will leave you underinvested as the market continues to march higher. No one knows exactly where and when inflection points will form. Hanging on to some token long exposure may allow you to avoid the FOMO (fear of missing out) syndrome that leads to poor decision making at inopportune times. Analyze the risk profile of your exposure. If you loaded up on high beta sectors of the market such as technology or consumer discretionary stocks, it may be prudent to switch to a more defensive approach . That could include a low volatility index such as the PowerShares S&P 500 Low Volatility Portfolio (NYSEARCA: SPLV ) or individual sectors exhibiting less relative price sensitivity. That way you are still able to participate in some measure of upside potential with the intent of reducing downside risk. The Bottom Line There is always an opportunity cost when you make a change to your portfolio that your intended actions lead to more harm than good. Nevertheless, with a well-thought out game plan and sound portfolio management principles, you can enhance the odds of a favorable outcome.

Surfing The Market Waves: The Nested Pullback

Patterns are important in trading; you might even say that trading is basically a game of recognizing the right patterns and doing the right thing when they happen. Most of you who have read my blog or my book, or have seen the research I write every day, know that I focus heavily on trading pullbacks in most market environments – pullbacks in trends, after breakouts, before breakouts, at the end of trends, at turning points in trends – even a simple pattern offers many ways to trade the market’s action. One of the more useful variations of the pullback theme is something I have called a “nested pullback.” As always, terminology can be confusing, so it’s important to realize that the “nested” part of the term means that the nested pullback is a smaller structure that is “nested” within the larger pullback’s drive to resolution. It is not nested within the larger pullback itself, but, rather, within the thrust that happens when the bigger pullback begins to turn into another trend leg. Another way to think about it is that it is a pause: the bigger pullback starts to go into another trend leg, and that move stalls into a small consolidation which is the nested pullback. (I wrote a longer post about a year ago here .) Take a look at this recent example in natural gas futures: Nested pullback in natural gas. Identifying the bigger pullback was easy if you were able to let go of preconceptions, concerns about sentiment/COT data, and other nonsense that always encourages us to fade trends. So many times, the right thing to do is to simply align ourselves with the dominant group in the market until the market makes it clear that something has changed. The market is in a downtrend so we want to short bear flags – that sentence is the essence of one pretty successful trading plan. The nested pullback provided additional confirmation. We obviously would prefer if every trade would move immediately and cleanly to its target, but things don’t often work like that. It’s more common for a move to stall or pause, but we can then often find additional information in the character of that pause. In this case, the nested pullback showed that there was a good probability that this market would break lower. (For instance, a pause that had a lot of sharp rallies would be more likely to suggest that factors were beginning to align against the trade.) This is a good pattern to add to your toolkit because it can do at least three things for you: 1) it gives you some insight into how to manage the trade and how to tighten stops, 2) it can provide a secondary entry if you miss the initial spot to get into the trade, and 3) it can be a good spot to add, if you do that within your trading plan. Spend some time looking for this pattern and see if it can enhance the way you view market trends. I’m very suspicious of “after the fact” analysis, and you should be too. Anyone can find any pattern on an old chart, but this is another example that we identified in real time: I signaled the initial short to my research clients and identified the nested pullback as it was developing. We took partial profits into the decline, and are still short for today’s meltdown. Obviously, not every trade works like this, but this is a clean example of the pattern, and a good example to commit to memory.

5 Best-Rated Large-Cap Growth Mutual Funds For High Returns

Growth funds become a natural choice for investors when capital appreciation over the long term takes precedence over dividend payouts. These funds focus on realizing an appreciable amount of capital growth by investing in stocks of firms whose values are projected to rise over the long term. However, a relatively higher tolerance to risk and the willingness to park funds for the longer term are necessary prerequisites of investing in these securities. This is because they may experience relatively more fluctuations than other fund classes. Meanwhile, large-cap funds are an ideal investment option for investors looking for high-return potential that comes with lower risk than small-cap and mid-cap funds. These funds have exposure to large-cap stocks, providing long-term performance history and assuring more stability than what mid caps or small caps offer. Below we will share with you 5 top-ranked large-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) as we expect these mutual funds to outperform their peers in the future. Nationwide Growth A (MUTF: NMFAX ) seeks long-term capital appreciation. NMFAX invests in common stocks of large-cap and mid-cap companies. NMFAX invests in those companies whose earnings are anticipated to grow at a faster rate than those of other companies. NMFAX may get involved in frequent trading of portfolio securities. The Nationwide Growth A fund returned 10.1% in the last one year. As of September 2015, NMFAX held 82 issues with 7.07% of its assets invested in Apple Inc. (NASDAQ: AAPL ). Nuveen Growth A (MUTF: NSAGX ) invests a major portion of its assets in equity securities of companies having market capitalizations similar to companies listed in the Russell 1000 Index. NSAGX may invest up to 25% of net assets in non-US equity securities that are US dollar-denominated. The Nuveen Growth A fund returned 10.7% in the last one year. Robert C. Doll is the fund manager and has managed NSAGX since 2012. Goldman Sachs Large Cap Growth Insights A (MUTF: GLCGX ) seeks long-term capital appreciation. GLCGX invests a large portion of its assets in a broadly diversified portfolio of equity investments in large-cap US issuers and non-US issuers traded in the US. The Goldman Sachs Large Cap Growth Insights A fund returned 10.6% in the last one year. GLCGX has an expense ratio of 0.96% as compared to the category average of 1.19% T. Rowe Price Tax-Efficient Equity (MUTF: PREFX ) invests in high-quality companies that are believed to have impressive fundamentals, revenue growth, earnings and strong management. Though PREFX invests primarily in domestic companies, it may also invest in non-US companies. The T. Rowe Price Tax-Efficient Equity fund returned 13.6% in the last one year. Donald J. Peters is the fund manager and has managed PREFX since 2000. Vanguard US Growth Investor (MUTF: VWUSX ) seeks long-term growth of capital. VWUSX invests in large-capitalization stocks of seasoned US companies with records of superior growth. VWUSX chooses companies with strong positions in their markets and reasonable financial strength. The management invests in stocks of large capitalization companies that offer the best available combination of relative earnings growth and attractive valuation. VWUSX distributes dividends and capital gains in December. The Vanguard US Growth Investor fund returned 14.2% in the last one year. VWUSX has an expense ratio of 0.44% as compared to the category average of 1.19%. Original Post