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Are You a “Risk-on or Risk-Off” Investor?

Investor checking their portfolio performance and adjusting risk tolerance

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Investors’ patience has really been tested in the last 18 months or so. After 2020 and 2021, we all became a bit spoiled and expected double-digit returns in the equity markets. Our favorite tech companies were leading the pack and the companies to avoid being the types of large companies that rarely perform well.  

How did most of us invest before? 

We bet more and more into the Growth Sectors, technology, biotech, and internet-related industries–plus, some into Bitcoin. If you did this, you were down close to 40% last year and another 10% this year. Bitcoin is down 56% in the last twelve months. The darlings of the “younger” generation of investors, computer traders, and speculators are down in the last twelve months as well.

Tesla is down 60%, Disney is down 31%, Amazon is down 43%, and Google is down 31% as of the date I’m writing this article. Plus, as you already know from the news, the regional banking sector has temporarily turned upside down. 

These investments are called “Risk-On” investments. In this case, you are a Risk-On Investor.

What’s changed since then? 

We’ve had a major market correction and growth-oriented investments are temporarily out. Value (dividend) equities are back in vogue, after a seven-year hiatus. Even these value investments are experiencing some declines this year, however, not as severe as last year. 

And…interest rates have gone up precipitously. 6-month T-Bills are now paying above 4% and enhanced short-term bond funds are paying a bit more. After 2022 being the worst year for bonds since the Great Recession, many predict that 2023 will be a great year for bonds. 

If this now seems very attractive, you have become a “risk-off” investor. In this case, we need to update your risk-tolerance profile and change your portfolio. Today is a great time to review your holdings and make sure you are positioned properly for the “new normal” of today.

Money will be made this year. Let’s make sure we are all properly positioned for success.

You can reach me at elliot@prosperityfinancialgroup.com or 925-314-8503.

All my best and Happy Spring, 

Elliot

Expert Insights

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