The recent market and exchange traded fund (ETF) turmoil has investors and advisors alike rethinking the “buy-and-hold” strategy.
One firm in Pennsylvania has moved 65% of its assets into cash positions, making it the largest cash weighting for the firm in its history, reports Jeff Benjamin for Investment News. The firm isn’t alone. While some advisors say they would prefer to buy-and-hold forever, they realize it would be tougher to explain to clients why they haven’t made money for 10 or 20 years.
The fact is, too, that many advisors have never experienced this kind of market volatility.
Mutual fund investors are pulling out of U.S. and international stock funds, albeit at a slower rate than in previous weeks. The week ending Oct. 15, $13.9 billion was pulled out. The previous week, $43.3 billion was pulled out, reports Jonathan Burton for MarketWatch.
Bond funds came under the greatest pressure as investors withdrew $15.1 billion, or almost twice the $8.8 billion that flowed out the week before.
Although redemption is letting up, the intensity is still apparent and sales problems for the future may be at stake. TrimTabs suggests that funds have experienced redemptions at $5 billion per day in October, sign of nervous investors, reports Joe Morris of Ignites.
The sales that are at stake are focused on the buy-and-hold investors, which have been burned badly this month. Also, the retirement customer is at risk, as they may not invest as generously in the future, due to the disappearing nest eggs.
If you’re a buy and hold type and are stressed out, consider selling one-third of your portfolio as you wait out the market storm.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.