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ETF Trend Following Playbook, The: Profiting from Trends in Bull or Bear Markets with Exchange Traded Funds

By Tom Lydon

Published by FT Press

Published Date: Aug 13, 2009

Description

Master the Low-Risk ETF-Based Investing Strategy That Gives You the Chance to Make Money in Any Market Climate

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“Tom Lydon has been a leader in the ETF business for many years. His new book walks through the basics of ETFs investing and shows why professionals–and increasingly, individuals–are turning to ETFs.”

–Bob Pisani, CNBC Reporter

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“Our complex and global financial system has created a powerful need for guideposts for investors and traders alike. Tom Lydon provides an excellent tool to help navigate the current economic environment in a clear, concise, easy-to-understand way.”

–John L. Jacobs, EVP and CMO, The NASDAQ OMX Group, Inc.

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“There are hundreds of writers, speakers, and advisers clamoring to get a seat aboard the ETF bandwagon. However, if you’re looking for genuine insight from a real pioneer, then read Tom Lydon. Not only is Tom’s The ETF Trend Following Playbook a principled how-to guide for individual investors, it is requisite reading for money managers.”

–Gary Gordon, Editor of ETFExpert.com

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“Tom Lydon has put together a concise handbook for the active ETF trader outlining the key drivers of successful trend investing. The ETF Trend Following Playbook provides sound advice for traders as well as a comprehensive and up-to-date tour of all the ETF world has to offer.”

–Scott Burns, Director of ETF Analysis at Morningstar

Table of Contents

Acknowledgments . . . xii

About the Author . . . xiv

Introduction: Buy—and—Hold: Rest in Peace . . . xv

Chapter 1 Trends Are an Investor’s Best Friend . . . 1

Buy-and-Hold’s Funeral March . . . 4

Getting in Touch with Your Emotions . . . 7

Never-Ending Opportunities . . . 9

Chapter 2 Risk and Disaster Don’t Have to Go Hand-in-Hand . . . 11

Greed and Fear and Stocks, Oh My! . . . 12

Running Scared . . . 13

What Kind of Risk Level Can You Tolerate? . . .14

Types of Risk . . . 16

Staying Grounded . . . 17

Is Time on Your Side? . . . 17

The Go-Getter (Aggressive) . . . 17

The In-Betweener (Somewhat Less Aggressive) . . . 18

The Almost There (Moderately Conservative) . . . 18

The I’m Outta Here (Conservative) . . . 18

Chapter 3 Spotting Trends . . . 23

Tools of the Trade . . . 23

Learning to Identify Trends . . . 24

The Rules of the Game . . . 25

Understanding the Moving Average . . . 26

Exiting Safely and Profitably . . . 27

Avoiding a Bursting Bubble . . . 29

Learning to Live with “the Sell” . . . 29

Finding the Trends . . . 30

Up, Down, and Flat as a Pancake . . . 31

Timing Is Everything . . . 35

Chapter 4 Why Trend Following Can’t Be Beat . . . 39

Never Look Back . . . 42

What Happens After You Sell? . . . 43

Conquer Volatility, Don’t Let It Conquer You . . . 44

Do You Have Any Better Ideas? . . . 44

Buy-and-Hold: Does It Work Like It Should? . . . 45

Where That Leaves Us . . . 46

Chapter 5 The Nuts and Bolts of ETFs . . . 49

Why ETFs Are a Better Solution . . . 50

A Fast-Growing Industry . . . 53

Evaluating ETFs . . . 54

Employing ETFs . . . 56

Chapter 6 Tools You Can Use . . . 61

News . . . 61

Analysis . . . 62

Looking Under the Hood . . . 63

Charting . . . 64

Chapter 7 Navigating U.S. Markets . . . 65

Choices Galore . . . 66

Dow Jones Industrial Average . . . 67

The S&P 500 . . . 69

Russell Mid-Cap Index . . . 70

The Russell 2000 . . . 70

Growth Versus Value . . . 72

Value: Slower but Steadier . . . 72

Trends in Value and Growth . . . 73

Domestic Market ETFs . . . 74

Digging in Even Deeper . . . 75

Chapter 8 International Opportunities . . . 77

The Land of the Rising Sun...and Profits . . . 79

The Beginning of the End . . . 80

Emerging Markets . . . 82

China’s Dragon . . . 84

Investing in Emerging Economies . . . 86

Another BRIC in the Wall . . . 87

International ETFs . . . 88

Developed Markets . . . 89

Emerging Markets . . . 90

Chapter 9 The Best-Looking Sector in the Room . . . 93

Technology: High Highs and Lower Lows . . . 95

The Bubble Springs a Leak . . . 96

Passing Around Blame . . . 98

One Big Financial Mess . . . 99

The Beginning of the Global Crisis . . . 100

Sector-Specific ETFs . . . 101

Power Up with Utility ETFs . . . 103

Checking Up on Healthcare ETFs . . . 104

Banking on Financials . . . 104

Chapter 10 The Luster of Gold and Crude . . . 107

Oil: A Slippery, Yet Profitable Slope . . . 110

Turning Trends into Profits . . . 113

Owning Your Share of Commodities . . . 114

Agriculture . . . 116

Energy . . . 117

Metals (Precious, Base, and Industrial) . . . 118

Broad-Based Commodity ETFs . . . 119

Going the Roundabout Way . . . 120

South Africa . . . 120

Chile . . . 121

Russia . . . 121

Australia . . . 121

Commodities: A Valuable Part of Your Portfolio . . . 122

Chapter 11 The World of Currencies . . . 123

Monitoring the Ups and Downs of Money . . . 123

A Rocky Road for the U.S. Dollar . . .124

Citizens Suffer . . . 124

The Dollar Bucks Its Trend–Will It Last? . . . 126

Making the Most Out of Currency ETFs . . .129

Squeezing the Most from Your Dollars . . . 131

Chapter 12 Trends in Fixed Income . . . 133

Factors to Consider . . . 137

The Yield Curve . . . 139

Recent Trends Spotted . . . 141

Taxes and Municipal Bond Trends . . . 142

High-Yield Opportunity . . . 144

Fixed-Income ETFs . . . 144

Who Wants Bonds? . . . 146

How to Choose Bond ETFs . . . 147

Chapter 13 Getting Leverage in the Markets . . . 149

The Long and Short of ETFs . . . 150

Pumping Up Returns . . . 154

Chapter 14 Conclusion: Let’s Get to Work . . . 159

Switching from Mutual Funds to ETFs . . . 161

Working with Your Advisor . . . 162

Wrap—Up . . . 164

Glossary . . . 165

References and Resources . . . 181

References . . . 181

Resources . . . 197

Books . . . 197

Services . . . 198

Index . . . 199

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ISBN-10: 0-13-263923-8

ISBN-13: 978-0-13-263923-1

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