Best ETFs for 2022 — Grizzly Bulls Blog

An investment in knowledge pays the best interest.

— Benjamin Franklin

Introduction

2021 was a fantastic year for the stock market with all major indices recording strong double digit gains. It was also a year of historically low volatility, with an intra-year max drawdown of a mere 5.88% which occurred during the September-October pullback. Usually after such calm years we see a return of volatility with a vengeance in the following calendar year. The most recent example of this was the turbulent 2018 with two 12%+ drawdowns and one 20%+ drop that was the first legitimate bear market scare since the bull market began in 2009. This volatile year of course followed the nearly-unprecedented complacent market of 2017.

ETF List

Here’s the TLDR list:

  1. XSLV
  2. XMLV
  3. QQQJ
XSLV, XMLV, QQQJ — favorite ETFs for 2022

XSLV

Small caps have underperformed for the past few years. As such, their valuations are much lower than large caps. This is the opposite behavior of what we’ve come to expect from small caps when looking at a longer term, 20+ year horizon, where small caps have historically outperformed and maintained higher valuations.

XMLV

Mid caps have also underperformed over the past few years, and like the small caps, their valuations are now very attractive compared to the large caps. Historically, mid caps as a whole have outperformed even the small caps, and had the largest total returns of any equity asset class.

QQQJ

You can think of QQQJ as sort of the little brothers and sisters of QQQ. This ETF holds a market-cap weighted basket of mostly tech companies that are just beyond the threshold for inclusion into the Nasdaq 100 ( QQQ). As such, it is a group of mid caps and stocks that barely qualify as large caps. Many of these companies have IPO’d in the past 3 years.

  1. Mongo DB that sells a best-in-class NoSQL database and is growing at a break-neck 50.5% annually
  2. The Trade Desk that has built a revolutionary data-driven digital advertising platform and is growing at 39.3% annually
  3. Zebra Technologies that has built high tech solutions that provide businesses with better operational visibility and is growing at 26.9% annually

How to invest in ETFs while following a Grizzly Bulls Model

At Grizzly Bulls, we have built several algorithmic trading models and market timing systems to help you navigate choppy waters, limit your drawdowns and outperform the market as a whole. See the end of the article for brief descriptions and links to learn more about each one.

  1. Exactly as prescribed. I.e. you too switch 100% of your account from long SPX / SPY or some other instrument that tracks the S&P 500 to 100% cash by selling all your positions on a sell signal, and then rebuying them on a buy signal.
  2. As a hedging system. I.e. you buy SH, the 1x inverse S&P 500 ETF in a value that matches the rest of your long positions for an overall market neutral position. Or you could buy PUTs on SPY or sell S&P 500 Futures against your net long exposure value. The key point would be that you achieve market neutrality during sell signals.
  3. One of the above, but with leverage by using a margin account or trading Futures or Options.

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Lee Bailey

Lee Bailey

Founder @ Grizzly Bulls. We’re on a mission to democratize access to the most sophisticated trading strategies by publishing signals from our algotrading models