3 Ways To Invest In Stocks (Even When The Ride Is Coming To An End)


Can Fed actions and the actions of other major central banks (e.g., European Central Bank, People’s Bank of China, etc.) really keep U.S. asset prices elevated indefinitely? In spite of late-cycle indications? Many in the financial media seem to think so.

However, it is more likely that a shock to the system will trigger a wealth effect reversal. And with it, another recession.

Until that time, though, investors still need to allocate a percentage of their assets to equities. Here are three ways that one may do so, even if the stock bull is close to meeting its maker:

1. Defined Outcome ETFs. Would you willingly cap your upside in the S&P 500 over the next 12 months if it meant you would not experience any losses on the first 15% of a market sell-off? The Innovator S&P 500 Power Buffer ETF (PNOV) seeks to track the return of the S&P 500 Price Return Index up to 8.75% (10/31/19) while buffering investors against the first 15% of losses over the next year (11/1/19-10/31/20).

The cap and the buffer have already changed from PNOV’s inception. At the moment (11/4/2019), with stocks gaining ground on 11/1 and 11/4, the cap is 8% and the buffer is 15.5%. The downside before the buffer would kick in is -0.72%.

2. Trend ETFs. Some folks would prefer to capture all of the market’s upside potential. After all, who knows how “bubblicious” equity indexes will get in the year ahead. Still, is there a mechanism for protecting gains or limiting losses within an equity investment itself?

Enter Pacer’s Trendpilot US Large Cap ETF (PTLC). As long as the market is trending higher, you’re in there. Should a short-term market downtrend develop, PTLC pares back some of its equity exposure. And if the market signals a longer-term downtrend? PTLC shifts its allocation to the safety of treasury bills.

I am a fan of paying attention to technical trends. Long-time readers know that I am particularly fond of the slope of the S&P 500’s 10-month simple moving average (SMA) as well as its monthly close. The monthly close on the 10-month SMA helped me sidestep the bulk of the carnage in 2000 as well as 2008.

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ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser ...

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