Are you ready to take a risk? Investor and personal finance author Ric Edelman believes it’s a practical strategy to withdraw some investments at the moment.
In an interview with CNBC’s “ETF Edge,” Edelman Financial Engines founder Ric Edelman stated, “It comes down to behavioral finance. It comes down to human emotion. Do you have the courage to stay in the market when things get tough, like they did in ’01, ’08, and 2020? Can you handle the volatility?”
Edelman also cited several reasons to be skeptical in the current market climate, including challenges in real estate, high interest rates, the risk of government shutdowns, and the Israel-Hamas war.
He further explained, “It’s easy to be negative, and that might lead you to question why you should risk losing another 20% or 30% of your money, especially if you’ve already accumulated a significant amount and are in your 60s or 70s. Instead, you could choose the safety and protection of bonds, U.S. Treasury bonds, or bank CDs and earn a guaranteed 5%. It’s a tempting option.”
While Edelman acknowledged that this strategy might result in lower profits, he emphasized the importance of peace of mind and being able to sleep better at night.
“I believe not everyone in the investment world is acting logically. Emotions play a significant role, and it’s crucial to know yourself,” added Edelman.
Holly Framsted, head of global product strategy and development at The Capital Group, also observed a trend of investors reducing risk. In response, her firm is launching new batches of fixed-income-focused exchange-traded funds (ETFs).
“We’re noticing increased interest in short-duration fixed income,” Framsted mentioned. “The Capital Group Core Bond ETF was one of the initial six funds we introduced. We’re receiving interest from our client base, who generally have a long-term perspective. However, due to the current market environment, conversations are focused on short-duration funds.”
The firm’s bond ETF has remained relatively stable since its launch on September 28. According to the Capital Group’s website, the firm manages over $2.3 trillion as of June 30.
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