Until recently, many investors got accustomed to the U.S. stock market only going up.
But that was not normal. Now that volatility has creeped into the market, investors are asking how to protect their portfolio. There are four good ways I know of to protect your portfolio.
Let us explore with the help of two charts.
Two charts
Please click here for a chart of S&P 500 ETF SPY. The same analysis applies to the Dow Jones Industrial Average DJIA, Nasdaq 100 ETF QQQ, and small-cap ETF IWM.
Please click here for a chart of Facebook FB. The chart shows when The Arora Report gave a signal to take partial profits on Facebook, Google GOOG, GOOGL, and Twitter TWTR. For the sake of transparency, this is exactly the same chart that was previously published.
Please observe the following from the charts:
• On Jan. 26, which has turned out to be the top of the market, up to 69% of The Arora Report portfolios were protected. The chart shows three components of that protection and the specific amounts.
• Protection is dynamic and changes.
• Before the latest swoon, up to 85% of The Arora Report portfolios were protected. The chart shows three components of that protection and the specific amounts.
• The chart shows that during the February correction, volume became heavy. This indicated capitulation and the potential of a bounce. A bounce is exactly what happened, as seen in the chart.
• During the recent market swoon, the volume has not been heavy. This indicates that there is no capitulation at this time.
• The chart shows that during the market correction in February, the market got oversold. Oversold markets tend to bounce, and this is exactly what happened.
• During the current swoon, the market is not oversold.
The foregoing indicates that there is significant need for protection at this time.
Insurance policy
Most people will not go without insurance on their home, car or life. However, most investors do not even think about insurance to protect their portfolio. It is high time for those who have not been protecting their portfolio to start doing so….Read more at MarketWatch.
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