Market volatility is influencing retail investors’ strategies, according to Nick Ryder, Chief Investment Officer at Kathmere Capital Management. He cautions against using current market conditions as justification for prioritizing defensive trades such as dividend-paying stocks and bonds. Instead, Ryder advocates for a total return-oriented approach that encompasses a diverse mix of stocks, bonds, and other assets within a portfolio.
Ryder, whose firm manages $3.5 billion in assets, warns against the risks associated with “yield-chasing.” This practice often entails investors taking on greater interest rate risks by shifting to longer-duration securities or moving from investment-grade to high-yield bonds, which come with significantly different risk and return profiles. He emphasizes that a focus on generating income should not be the cornerstone of long-term portfolio construction. Rather, investors should begin with clearly defined goals and risk tolerance before considering income-generating assets, as market pullbacks are a natural component of investing for the long term.
Ryder remains upbeat about the macroeconomic environment, noting the resilience of the economy and corporate profitability. Echoing this sentiment, Christian Magoon, CEO of Amplify ETFs, advises investors to avoid letting distribution numbers dictate their investment decisions. He emphasizes the importance of balancing attractive yields with potential for long-term capital appreciation, warning that seeking maximum yield can lead to what he describes as a “yield trap.”
Why this story matters:
- Investors need guidance on navigating volatile markets effectively.
Key takeaway:
- A total return strategy is suggested as a more prudent investment approach compared to an income-focused strategy.
Opposing viewpoint:
- Some investors may argue that prioritizing income is essential for a stable portfolio, especially in uncertain economic climates.
