Many investors implement some sort of technical analysis in
their decision-making process when entering or exiting a position.
This may include looking at a chart to spot historical support and
resistance points or examining moving averages as key guideposts.
While mastering technical signals can be difficult, one suite of
exchange-traded notes takes the guesswork out of following the
trends of the market.
Earnings Season Is The Right Prescription For
The RBS U.S. Large Cap Trendpilot ETN (NYSE:
) follows a systematic method of being long the S&P 500 Total
Return Index when the market is above its 200-day moving average
and in three-month U.S.Treasury bills when it is below.
Simply put, this ETN seeks to avoid large drops in stocks by
moving to the safety of cash when the market falls below its
long-term moving average for five consecutive days. TRND will then
reallocate back to stocks when the market has traded back above
this key trend line for another five consecutive days.
The allowance for multiple consecutive days of trading above or
below the trend line is likely to help avoid whipsaws or bad
pricing data that can negatively impact performance.
Currently, this ETN has more than $340 million in total assets
and charges an expense ratio of 1.00 percent. It's also worth
noting that investor fees are reduced to 0.50 percent when the
portfolio is tracking cash.
Paying A Premium
Those fees are in stark contrast to the 0.05 percent expense
ratio of the Vanguard S&P 500 ETF (NYSE:
), which tracks the same underlying index of stocks. However,
investors in TRND are paying a premium for the ability to avoid
significant draw downs and bear markets that can weigh on total
The advantage of the strategy implemented in TRND is that
emotions and predictions are removed from the equation. This allows
for a seamless transition between cash and stocks that is
implemented according to a strict rules-based methodology.
The Trend Is Your Friend
In addition to large-cap stocks, RBS has also implemented a
trend following approach for several other key indexes as well.
Some examples include: RBS Gold Trendpilot ETN (NYSE:
), RBS NASDAQ-100 Trendpilot ETN (NYSE:
), and RBS Mid Cap Trendpilot ETN (NYSE:
These innovative exchange-traded notes may further popularize
the old saying that "the trend is your friend."
© 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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