How ETF Investors Can Pull Through a Bear Market

A week of dramatic volatility has given rise to reactionary blunders from investors who are increasingly trying to find their footing.

With forecasts of extreme inflation disintegrating and a more aggressive approach from the Federal Reserve to hike interest rates, experts say ETF investors can use volatility to weather the storm by taking some action.

Consistency remains the key

Dan Egan, vice president of behavioral finance and investing in Betterment, told CNBC’s Bob, “Everyone who has an auto deposit or 401(k) contribution that’s going on continues. There’s no fear factor.” Pisani in an interview on Monday “ETF Edge” on Monday.

Egan said that as a result, he’s seen some defensive allocation changes from Betterment customers because they aren’t focused on doing it themselves.

“It’s been a scary period, but we haven’t seen people go crazy in any way,” he said.

Despite market volatility in recent weeks, inflows into basic exchange-traded funds have remained a mainstay this year.

Mike Akins, founding partner and CEO of ETF Action, said in the same interview, “Every time in the past 10 years we’ve seen a significant disruption in the market, where the market as a whole has dropped significantly, ETF inflows have actually been increasing. ” ,

Akins says the influx can be attributed to investors who have been sitting on older vehicles like mutual funds, who now have the opportunity to roll into more tax-efficient ETFs without similar results.

‘The money’s going to be here’

“Money is going to be here for the long term, so drawdowns aren’t a terrible thing,” Egan said, adding, ‘It’s unique to investors, not traders.

He explained that the long-term investment strategy provides the ease with which to sit through the volatility in recent weeks. And instead, investors can approach market turmoil as a buying opportunity.

Akins added to the sentiment by explaining that as withdrawals from 401K(k) accounts continue to rise, investors are putting their minimum distributions to work.

They want to leave it in the market,” Akins said. “ETFs have proven time and again that when the market retreats and people have an opportunity to reallocate, their choice of ETF is because of its tax efficiency, its liquidity.” and for its lower part. cost.”

hold the froth

The latest sign of a slowdown in the housing market fell on Thursday, where the number of housing startups declined for the second consecutive month. May fell 14.4% from April and 3.5% from a year earlier.

Egan said that the house down payment goal withdrawal at Betterment has been active for the past two to three years, but has seen a significant decline due to lack of affordability.

“People aren’t saving for that house down payment,” he said, “but they’re setting higher goals and they’re pushing their deadlines into the future.”

Fears of a foamy market may still be there for the short term, but Egan said this tendency to revise payment strategies and focus on financial targets that may be more than 10 years away sits day in and day out. Makes it easy. Today’s ups and downs and flows.