The current market volatility may lead retail investors toward potentially misguided financial decisions. Nick Ryder of Kathmere Capital Management advises against using the unstable market conditions as justification for pursuing defensive trades such as dividend stocks and bonds.
During an appearance on CNBC's "ETF Edge," Ryder, who is the chief investment officer at Kathmere Capital Management, emphasized the importance of not focusing solely on income. "We often see too many investors adopting an income-focused strategy, which can leave substantial gains unutilized. We generally recommend our clients maintain a total return-oriented approach across their entire portfolio of stocks, bonds, and more," he stated.
With Kathmere Capital Management overseeing $3.5 billion in assets, Ryder warns against "yield-chasing," suggesting it could lead investors to take on unnecessary risks. This includes extending interest rate risks, increasing portfolio duration, or moving from investment-grade bonds to high-yield options, which entail significantly different risk and return profiles.
Ryder believes income shouldn’t be the basis of long-term investment strategies. He advocates for starting with specific goals and risk tolerance before incorporating income, especially since market downturns are a natural part of long-term investing. According to Ryder, focusing first on income might inadvertently commit portfolios to unintended risks.
Despite the volatile market, Ryder is optimistic about the broader economic context, indicating, "Overall, the economy has been remarkably resilient, and corporate profitability has held strong."
This total-return approach is reiterated by Christian Magoon of Amplify ETFs, who encourages investors to look beyond distribution figures when making decisions. "We believe making smart yield decisions involves balancing attractive yield with the potential for long-term capital appreciation," said Magoon in the same CNBC interview. "Merely chasing the highest yield can be a trap."