Asset Diversification During Changing Times

While Greece is unraveling and remains under threat of disorderly default, we can’t deny that equity ETFs have had a favorable run since the start of the year. While I have advocated a less risky portfolio over the last several months due to deteriorating conditions in Europe, acting too conservatively can have its drawbacks.

As seen in this discussion, although equity activity has dropped as of late, equities have done surprisingly well with some of the historical correlations not holding in current times. 1-1/2 weeks ago, I added international equity ETFs in addition to domestic equity ETFs because their respective trend tracking indices are well above their trend lines. Thus, in order to capture some of the upside, it is crucial to take advantage of market bullishness in the short-term while maintaining a sizeable bond ETF allocation.

It’s unrealistic to fully realize positive trends as we want to see steady upward momentum first before adding exposure in a particular area. But with low volatility in recent weeks, this can be a solid entry to add a couple equity ETFs if you can afford to be a little more aggressive. Yet, as always, make sure you have trailing stop losses in place.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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