If you look at the price volatility of STI ETF monthly chart, it can be damn scary depending when you bought it and when you need to liquidate it to meet unexpected cash expenses arising from life crisis.
It has plunged from monthly high at $3.30 in May 2008 to the monthly low at $1.60 in Feb 2009 and has since recovered to monthly close at $2.93 in Jun 2010
STI ETF is a low cost managed investment fund but it is traded like a stock.
It is volatile too!
It may cause you to lose heavily just like any individual stock when you need to liquidate it at the wrong market condition e.g. in Feb 2009.
Open your mind wide and think!
STI ETF is a low cost but not a low-risk investment and it may potentially cause you lose money when you desperately need the money.
Posts
Im am speaking about exchange traded funds and closed end funds from the perspective of a citizen of the united states. The following may not apply to investors worldwide. Their are now over fifty single country funds available and maybe over 100 narrow sectors like airlines steel solar so why the concern for the nasdaq or the standard and poor five hunderd each one of these countries and sectors is a index of and by itself The solar exchange traded fund {TAN} is now down 90% from its high in 2007. If I were a investor or trader I would simply look for any exchange traded fund or closed end fund that does not use any leverage in their porfolios and start buying in the ratio of 0.50 percent of your cash on hand in my account after their is a 75% decline from its all time high and than buy twice as much in the ratio of 1.00 percent of your cash on hand in my account if that exchange traded fund or closed end fund declines another five percent an 80% decline from its all time high buy twice as much in the ratio of 2.00 percent of your cash on hand in my account at a 85% decline from its all time high buy twice as much in the ratio of 4.00 percent of your cash on hand in my account at a 90% decline from its all time high and finally buy twice as much in the ratio of 8.00 percent of your cash on hand in my account at a 95% decline from its all time high. Now I know that some of these funds will not decline 90% from their all time highs. Another thing that you might be wondering about I would run out of money. If I followed that method right wrong example take one hundred thousand dollars. Example Buy 500 dollars of xyz fund at 25 dollars off 75% from its all time high of 100 dollars buy 1000 dollars of xyz at 20 dollars off 80% from its all time high of 100 dollars. Buy 2000 dollars of xyz at 15 dollars off 85% from its all time high of 100 dollars Buy 4000 dollars of xyz at 10 dollars off 90% from its all time high and finally Buy 8000 dollars of xyz at 5 dollars off 95% from its all time high This way you will have your biggest positions in the funds that have declined the most and the smallest positions in the funds that have declined the least. Also keep in mind when you buy an exchange traded fund you are buying a basket of stocks so the fund connot go to zero unlike a stock. Than when any fund has regained three quarter of its value that would be 75 dollars in the case of eyz use a 10% trailing stop loss to protect your gains. Who knows you may sell out of the stock within 90% of its all time high. And their you have it a simple but brilliant strategy for exchange fund and closed end fund investing.
ReplyDelete