Market volatility trap? This investment strategy may hurt investors

Market volatility has been causing a stir among retail investors, but according to Nick Ryder, the chief investment officer at Kathmere Capital Management, now is not the time to resort to defensive trades like dividend-paying stocks and bonds. Ryder, whose firm manages $3.5 billion in assets, believes that taking an income-focused approach may leave a lot on the table.

“We generally just advise for all of our clients to take a total return-oriented approach … that’s going to apply across stocks, bonds and everything in between within a portfolio,” Ryder told CNBC’s “ETF Edge.” He warns against the practice of “yield-chasing,” which involves taking on greater risk in pursuit of higher yields.

Ryder emphasizes that income should not be the sole focus when building long-term investment portfolios. Instead, he suggests starting with clear goals and risk tolerance and then incorporating income strategies. He cautions that an income-first approach can lead to unintended risks and bets in a portfolio.

Despite the current market uncertainty, Ryder remains optimistic about the macroeconomic environment. “Overall, the economy has been pretty darn resilient,” he noted. Corporate profitability has also shown resilience, adding to his positive outlook.

Christian Magoon, the CEO of Amplify ETFs, echoes Ryder’s sentiments, emphasizing the importance of balancing yield with long-term capital appreciation. “We think being smart about yield means balancing attractive yield with upside or long-term capital appreciation … not just going for a maximum possible yield,” Magoon stated.

In conclusion, both Ryder and Magoon advocate for a total return-oriented approach that considers a balance of income and capital appreciation. By focusing on long-term goals and risk management, investors can navigate market volatility more effectively and avoid falling into the trap of chasing high yields without considering the underlying risks.