Using ETFs in a Tough, Sideways-to-Bear Market

by Max Isaacman

The past 10 to 12 years have been difficult for stock market investors, with high volatility making it risky to buy and hold stocks and exchange-traded funds (ETFs).

This has forced long-term investors to become traders and to use securities they never thought they would, such as inverse and enhanced ETFs. This volatile, sideways market could continue for several more years. Investors and traders have to use the volatility to make money, while attempting to limit losses.

In my book “Winning with ETF Strategies” (FT Press/Minyanville Media, 2012), I point out that you should determine at what point in a cycle the market is currently and where it might be heading. Markets move in cycles, which take years to complete. In my book there is research by Guggenheim Investments showing that over the past 113 years, there were more bear market years than bull market years. Bull markets lasted an average of 10 years, and bear markets lasted an average of 18 years. The bear years were more similar to sideways markets than big down markets.

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Max Isaacman is a registered investment adviser in San Francisco. His book “Winning with ETF Strategies” was published by FT Press/Minyanville Media in 2012.


Discussion

V Parachini from California posted about 1 year ago:

Why no mention or use of any of Vanguard's various ETF offerings? In most cases the lowest fees available and for Flagship clients no commissions. Results in most cases are competitive on a lifetime basis.


H Mc allister from Arkansas posted about 1 year ago:

An excellent article, but the individual still has to determinr what his overall objectives are and which ETF's are most appropriate. This article should be read and reread.


Joe Petti from Connecticut posted about 1 year ago:

Great Article!
I wish you could list all of the ETF's in a separate column so that I can copy them and paste them directly into my trading software .


Thomas Clasen from Virginia posted about 1 year ago:

Some good specific suggestions of ETFs for specific purposes. Discussion of Vanguard ETFs would be useful


G. ed Connett from California posted about 1 year ago:

INTERESTED IN REIT ETFS WHERE TO FINF THEM??


Charles Rotblut from Illinois posted about 1 year ago:

Hi,

Real estate ETFs are included in the annual ETF guide, which is also in the August issue. They are also discussed in the September Journal, which will we have up soon.

-Charles


Leonard Lofrisco from New York posted 8 months ago:

Why no model portfolio for ETF's? You have one from Mutual Funds and Shadow Stocks.


Charles Rotblut from Illinois posted 8 months ago:

Leonard, the Model Fund portfolio holds both ETFs and mutual funds.

-Charles


Karl Reseck from California posted 8 months ago:

Have you considered SYLD, the Cambria Shareholder Yield ETF?


Russell Chevrette from Oregon posted 8 months ago:

Max Isaacman cites a Guggenheim study that states bear markets last, on average, about 18 years. But Mark Hulbert, in an article entitled Bear Markets by the Numbers, states "The average bear market since 1900 has lasted 410 days, according to calculations conducted by Ned Davis Research." (By comparison, Guggenheim looked at the last 50 years.)
So why the difference? Perhaps the time period examined? Perhaps different definitions of what constitutes a bear market? You can't tell from these soundbite articles. One can write an article that produces anxiety, while another can produce Stoic resolve. Unless the fundamental assumptions are defined and clarified and defended, I can't help but be skeptical about any conclusions derived from them.


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