Solid research and sound investment principals are what will earn investors returns in the months and years ahead. Investing in the midst of the market's current volatility requires more prudence and long-term thinking than trend-chasing.
Investors should show strong conviction before moving into a fund, a sector or an individual stock because mere sector-rotation strategies will no longer hold up as they used to this year. We can see from TheStreet.com Ratings' most recent exchange-traded funds upgrades list below that there are some ETFs in once-out-of-favor sectors that are suddenly back in fashion -- sectors like banking, which is as good as dead with or without a bailout, the U.S. dollar, which until recently was trading at some of its worst levels in recent memory, and pharmaceuticals, which has been unloved for ages. To go long this market, investors need to arrive at a valuation for what they are considering buying -- for example, a value for the U.S. dollar or value for a particular commodity or stock. Without an approximate value in relation to an asset, investors would be better off in cash or cash equivalents -- although even this defensive strategy looked dangerous last week. Also apparent in the upgrades list below are leveraged funds. These investment vehicles are likely to be in vogue for some time as they use leverage to amplify returns. However, investors should be aware that this strategy can also amplify losses. Two funds in the list below used leverage to short oil and gas and basic materials. The downgrades list is essentially an inverse reflection of the upgrades list -- that is to say, it reflects the sectors and asset classes that fell out of fashion last month. Net net, the market is so messed up right now that the ETFs in the downgrades list could be in the upgrade table next month and vice versa. First, the upgrades list:| Name | Ticker | New Grade | Old Grade | Category | One-Month Return |
| PowerShares Dynamic Banking Portfolio | PJB | A | D+ | Sector - Financial Services | 4.73 |
| PowerShares DB US Dollar Bullish Fund | UUP | A+ | C | Growth - Domestic | 5.37 |
| ProShares Ultra Short Oil & Gas | DUG | C+ | E | Sector - Energy/Natural Res | -2.01 |
| SPDR S&P Pharmaceuticals ETF | XPH | A+ | C+ | Sector - Health/Biotechnology | 5.75 |
| ProShares Ultra Short Basic Materials | SMN | C+ | E+ | Equity Income | 6.71 |
| Name | Ticker | New Grade | Old Grade | Category | One-Month Return |
| CurrencyShares Australian Dollar Trust | FXA | C | A+ | Non-US Equity | -8.30 |
| PowerShares DB Gold Fund | DGL | C | A+ | Sector - Precious Metals | -9.24 |
| PowerShares DB US Dollar Bearish Fund | UDN | C | A+ | Growth - Domestic | -5.20 |
| CurrencyShares Brit Pnd Sterling Trust | FXB | C- | A | Non-US Equity | -7.68 |
| iShares DJ US Oil Equip & Services | IEZ | D | B+ | Sector - Energy/Natural Res | -3.61 |
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| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 10,318.16 | 1,091.38 | 2,146.04 | 33.56 |
Oil *
77.53
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DOWN
14.28
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DOWN
3.52
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DOWN
10.78
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UP
0.07
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10 Yr
3.36%
SPDR Gold
112.94
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+0.21%
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Data delayed 20 minutes |
