ETFs Let You Invest With Your Head, Not Your Heart
Then came the U.S. debt downgrade. After that, the eurozone appeared to teeter on the brink of survival. All of a sudden, stock exposure to "emergers" had become a liability.
Perhaps obviously, my heart still felt that Malaysia, through EWM, was a strong contender for emerging market exposure. Yet, I am not, nor have I ever been, a buy-n-holder. So when EWM fell below and stayed below its 200-day moving average -- when it simultaneously hit stop-limit loss orders -- it was time to let go. My approach to risk management for the past quarter century has always been to control the outcome of every investment by securing a big gain, small gain or small loss; I actively manage against experiencing a big loss.
It is not that I predicted Malaysia's struggles in the years that followed. My heart believed that Southeast Asia offered compelling opportunity. However, my head has always held firm to an investing principal of controlling what can be controlled. Keep costs low, mind the cash flow (yield) and celebrate liquidity. ETFs make it possible to do all of these things.
EWM has still not reappeared on my "wish list screen." By unemotionally selling EWM in August 2011, I had the world of different ETF assets to consider buying as well as an opportunity to ride out the euro-zone crisis with a heavy dose of cash. My heart might have wanted to see all of the ducks line up again for Malaysia in the years since - technical uptrend, relative strength, economic growth, fundamental value - but they have not. (At least not yet.) The questions many may have at this moment are, "So what are you currently invested in?" and "What's on your wish list?" Some of those answers can be found in the feature, Positioning Your Portfolio For 2014. Nevertheless, it's worth noting that since the start of the year, I have added iShares MSCI New Zealand (ENZL)to a number of client accounts for a combination of factors including, but not limited to: (a) improved economic growth, (b) yen carry trade beneficiary, (c) 4% annualized yield, (d) technical uptrend and (e) sector diversification.
Similarly, there are a number of yield-oriented income investments in the muni and corporate credit space that I have added to a variety of portfolios here in 2014, including BlackRock Muni Assets (MUA) and Guggenheim BulletShares 2020 High Yield (BSJK). Bear in mind, the "rates can only go up" argument has been largely one-sided.
Follow @etfexpert This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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