Today the average coupon on ZAG is about 3. It will never be that tidy because interest rates change constantly, but the key point is that any bond ETF filled with high-coupon premium bonds should be expected to fall in price over time. One important note: whenever ETFs report their returns, they assume all cash distributions are reinvested immediately. With an ETF this is impossible, even if you are using a dividend reinvested plan, because some portion of the interest or dividends will always end up as part of your cash balance.
But it will be close enough. This first appeared on CanadianCouchPotato. Your email address will not be published. Bonds By Dan Bortolotti on May 28, The way fixed income ETF returns are displayed can make investors think they are losing money. Comments Cancel reply Your email address will not be published.
Related Articles. Investing Making sense of the markets this week, November It eliminates random price fluctuations and attempts to show trend changes. By filtering minor price movements, the indicator makes trends easier to spot in all time frames. The Zig Zag indicator is often used in conjunction with Elliot Wave Theory to determine the positioning of each wave in the overall cycle.
Traders can experiment with different percentage settings to see what gives the best results. Although the Zig Zag indicator does not predict future trends, it helps to identify potential support and resistance zones between plotted swing highs and swing lows.
Zig Zag lines can also reveal reversal patterns, i. Traders can use popular technical indicators such as the relative strength index RSI and the stochastics oscillator to confirm whether the price of a security is overbought or oversold when the Zig Zag line changes direction. A momentum investor might use the indicator to stay in a trade until the Zig Zag line confirms in the opposite direction.
For example, if the investor holds a long position , they would not sell until the Zig Zag line turns downward. Like other trend-following indicators , buy and sell signals are based on past price history that may not be predictive of future price action. For example, the majority of a trend may have already happened when a Zig Zag line finally appears.
Traders should be aware the most recent Zig Zag line may not be permanent. When price changes direction, the indicator starts to draw a new line. Given the lag, many traders use the Zig Zag indicator to confirm the direction of the trend rather than attempting to time a perfect entry or exit. Technical Analysis Basic Education. Advanced Technical Analysis Concepts. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
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