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Business

A market for risk takers? Protect yourself against the ugliness of the market

Nature

This may be a risk-taking market.

Investor and Personal Finance author Ric Edelman believes it’s a practical strategy to cash out now.

“It comes down to behavioral finance. It comes down to human emotion,” the founder of Edelman Financial Engines told CNBC’s “ETF Edge” this week. “Do you have the courage? Does your spouse have the courage to hold on if things go wrong like they did in 2001, 2008 and 2020? Can you hold on?”

Edelman added that there is a “list of reasons” to be cynical right now. He discusses the difficulties of the real estate market, high interest rates, the risks of government shutdown and the war between Israel and Hamas.

“It’s easy to be negative and that can lead you to say, ‘Why do I want to put myself in a position where I could maybe lose another 20 or 30 percent of my money when I’ve already amassed huge amount of money and I’m already in my 60s or 70s and I need security and protection and by the way I get five percent from my bonds, my US Treasury or my bank CD ?Why don’t I just park it? Earn 5%. Call it a day,” he said.

Edelman acknowledges that this strategy might be less profitable, but he suggests that it’s important to sleep better at night.

“I’m not sure everyone in the investing world acts logically rather than emotionally. You have to know yourself,” Edelman said.

Capital Group’s Holly Framsted also sees investors reducing risk, and her company is trying to meet their needs with a new batch of exchange-traded funds focused on fixed income.

“We are seeing increased interest in short-duration fixed income,” said the firm’s head of global strategy and product development.

Framsted assumes that investors are turning to short-duration funds in response to current market volatility.

“(The Capital Group Core Bond ETF) was one of the six initial funds we launched,” Framsted said. “We’re seeing interest among our customer base who tend to be long-term oriented across the spectrum. But certainly there are a lot of conversations in a short-term space given the environment we’re in let’s find.”

The company’s bond ETF has been virtually flat since its September 28 launch. Capital Group managed more than $2.3 trillion as of June 30, according to the company’s website.

Nature
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