2006 was a year of extremes. In the ETF world, 2 funds ruled on the extreme end, one by superior performance, the other by a devastating loss.
The clear winner was the China fund (FXI) with a yearly gain of about +81%.
While the 1-year chart shows this fund as being in a solid uptrend, it doesn’t tell the entire story. During the market melt-down of May/June 06, this fund dropped -21% off its high. So, if you worked with a recommended sell stop loss of 10%, you would have been out of your positions at that time. Of course, the subsequent market rebound rally would have offered a new entry point.
As the 1-year chart above shows, this fund never regained momentum and stayed below its long-term trend line for the remainder of the year.
The point is that no matter which fund you would have picked, a disciplined Buy/Sell strategy would have either kept you in the market on the right track or limited any potential losses from a wrong choice of funds.