How Investors Can Navigate the Markets on Autopilot
This article was originally published on ETFTrends.com.
Investors will certainly remember a 2018 flight that saw them cruise through much of the year on the back of an extended bull run only to get caught in a hailstorm of volatility at the end. With a de-risking maneuver of shifting to safe-havens like Treasury bills, investors could have nullified the year-end drawdown and limited losses.
However, the vast majority of investors don't have the time to constantly monitor the markets and adjust their portfolios to account for sudden changes. In essence, if a product existed that captured the upside while protecting the downside in the convenience of an ETF wrapper, this would be ideal.
Thankfully, there is such a product--the Pacer Trendpilot ETFs. It essentially puts an individual's investments on autopilot so that an investor is able to reap the benefits of a market trending up combined with built-in protection during a drawdown.
On the upcoming webcast, How Investors Can Navigate the Markets on Autopilot, Sean O'Hara, President of Pacer ETFs, will give attendees a closer look under the hood of the Trendpilot ETFs. Additionally, he will discuss the history of bear-bull market trends, the theory behind the 200-day simple moving average (SMA), how to locate trends despite market noise, and how advisors can incorporate trend-following strategies into a diversified portfolio.
The Trendpilot Strategy
At the heart of the Trendpilot strategy is the 200-day SMA. The reason for choosing the 200-day SMA is clear--within the last decade, using the technical indicator returned 6.23 percent as opposed to other SMA indicators.
By using an objective, rules-based trend following strategy, Trendpilot ETFs automatically adjust based on three indicators:
Equity Indicator: When the Benchmark Total Return Index closes above its 200-day SMA for five consecutive business days, the exposure will be 100% to the Benchmark Index. From the equity position, the Index will change to the 50/50 position or the T-Bill position depending on the 50/50 Indicator and the T-Bill Indicator.
Price Signal 50/50 Indicator: When the Benchmark Total Return Index closes below its 200-day SMA for five consecutive business days, the exposure will be 50% to the Benchmark Index and 50% to 3-Month US Treasury bills. From the 50/50 position, the Trendpilot™ Index will return to the equity position or change to the T-Bill position depending on the Equity Indicator or T-Bill Indicator.
Trend Signal T-Bill Indicator: When the Benchmark Total Return Index’s 200-day SMA closes lower than its value from five business days earlier, the exposurewill be 100% to 3-Month US Treasury bills. From the T-Bill position, the Trendpilot™ Index will change to the equity position when the Equity Indicator is triggered. The Index will not return to its 50/50 position unless the Equity Indicator is first triggered.
Furthermore, this strategy is incorporated into four ETFs– Pacer Trendpilot US Large Cap ETF (PTLC) , Pacer Trendpilot US Mid Cap ETF (PTMC) , Pacer Trendpilot 100 ETF (PTNQ) , and the Pacer Trendpilot European Index ETF (PTEU) .
During the webcast, O'Hara will discuss how these Trendpilot ETFs can provide potentially better risk-adjusted returns and increase equity exposure without taking on additional risk as opposed to other ETF products on the market. Moreover, O'Hara will delve further into how the ETFs de-risk into Treasury bills when an indicator is triggered.
Financial advisors who are interested in learning more about trend-following strategies can register for the Thursday, January 24 webcast here.
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