Buying Weakness vs Buying Strength

Apr 30, 2011

As the Japanese tsunami reached its zenith and rumors were swirling about nuclear wind possibly going into major Japanese cities, an intermediate low was reached. Another instance of how watching the present news too closely can lead to bad investment decisions -- a classic problem well-documented in behavioral finance.

Furthermore, if you look at the asset flow data, you can see that money poured into Japanese ETFs -- such as EWJ.   'Buy the dip' was the message.   But the Japanese market has not bounced nearly as well as other country funds.   Buying relative strength instead of buying weakness was once again the better performance play.

Below is a chart of the 10 largest commodity funds (in assets). We equal-weighted this to create our own 'commodity index' using the Free Portfolio Combine page.




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