Risk-taker’s market? Protecting against market ugliness

It may be a risk-taker’s market.

Investor and personal finance author Ric Edelman believes it’s a practical strategy to take chips off the table right now.

“It comes down to behavioral finance. It comes down to human emotion,” the Edelman Financial Engines founder told CNBC’s “ETF Edge” this week. “Do you have the stomach? Does your spouse have the stomach to hang in there if things get ugly like they did in ’01, ’08, 2020? Can you hang in there?”

Edelman added there’s a “laundry list of reasons” to be cynical right now. He includes struggles in the real estate market, high interest rates, government shutdown risks and the Israel-Hamas war.

“It’s easy to be negative and that can cause you to say, ‘Why do I want to put myself in a position of maybe losing another 20% or 30% of my money when I’ve already amassed an awful lot of money and I am already in my ’60s or ’70s and I need the safety and protection and by the way get five percent in my bonds or U.S. Treasury or my bank CD? Why don’t I just park it? Earn 5%. Call it a day,’ he said.

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

“I’m not sure everybody in the investment world is acting logically as opposed to emotionally. You’ve got to know yourself,” said Edelman.

The Capital Group’s Holly Framsted is also seeing investors de-risk, and her firm is trying to cater to them by offering a new batch of exchange-traded funds focused on fixed income.

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

Framsted speculates the investors are making the move to short-duration funds in response to the volatility of today’s market.

“[The Capital Group Core Bond ETF] was among the original six funds that we launched,” Framsted said. “We’re seeing interest among our client base who tend to be longer-term oriented in nature across the full spectrum. But certainly, a lot of conversations in the short-duration space given the environment that we’re in.”

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