There are many factors to what stocks I would select, but not quite as many for a fund. The fund needs to have a meaningful dividend in most cases, or be an exceptional value because the sector is overly-beaten down (fortunately I didn’t do a lot with processed foods…there are sectors that are beaten down for a long time).
But the idea is I have a particular fund, lets say a utility stock fund. It has dividends, but it can still plunge in a panic. I would use a trailing stop-loss of 3% — if it came down 3% from a peak then I would sell it. If it popped back up 0.5% from there I would re-buy it. If I only allowed that to happen for 2 days or 5 actions (whichever comes first) then I shouldn’t be jerked around too much.
Doing the math:
Purchase at $10,010, appreciation of 5%, stop-loss sale at $10190 (comission removed). Repurchase for $10260, stop-loss sale again for $10190, repurchase for $10260, stop-loss sale again for $10190. So the two repurchases cost me $140, but I’m still left with a gain of $50. The goal of course is to buy and have a 10%+ gain before any kind of stop-loss occurs.
Now I need to analyze the funds I’ve selected previously to see how they would have operated in the last year with the above.
I didn’t get back to my overall strategy, but I will eventually.