Wednesday, February 11, 2009

The Foolish Four

Once upon a time, there was a trading strategy called... well... the Foolish Four. Trust me, it was not intended as a foolish strategy. The trading paradigm was actually proven very successful (compared to the broad market index) over the back-testing period.

Now, since the invent of indexed funds, the strategy has been outclassed. ETF's Spyders, Holdrs, ETN's, and probably other oddly named vehicles are expected to surpass this success proven strategy.

I like these vehicles for a number of reasons: built in diversification, fantastic liquidity, news isolation, and more. My fav's are: BGU, TNA, ERX, FAS, and their bear market counterparts: BGZ, TZA, ERY and FAZ. (See my article about FAZ below.)

My picks, being leveraged by three, can be expected to outpace the broad market quite handily. Will you pick them in the next bear or bull market?

Update: I don't want to loose this article... people shorting the bull and bear pair and making $$$ on the slippage!

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