Market volatility trap? Why this income-first strategy may 'leave a lot on the table'

• Kathmere Capital's CIO cautions that income-first investing 'leaves a lot on the table' and can push portfolios into unintended risk exposures, such as moving from investment-grade to high-yield bonds
• Experts recommend a total return-oriented approach starting with investor goals and risk tolerance rather than leading with income generation
• Amplify ETFs' CEO warns against 'yield traps' where investors chase maximum yield without considering capital appreciation potential

Summary

Key Warning: Financial experts are cautioning investors against retreating into income-focused strategies during current market volatility, arguing this approach may significantly underperform.

Main Sources:

• Nick Ryder, CIO of Kathmere Capital Management ($3.5 billion AUM)
• Christian Magoon, CEO of Amplify ETFs

Core Arguments:

Ryder warns that income-first investing "leaves a lot on the table" and recommends a total return-oriented approach across all asset classes. He identifies specific risks in "yield-chasing" behavior, including:

• Extending duration in fixed income portfolios
• Moving from investment-grade to high-yield bonds
• Taking on unintended risk exposures

Strategy Recommendation:

Experts advocate building portfolios starting with investment goals and risk tolerance rather than income generation. They emphasize balancing attractive yields with long-term capital appreciation potential, warning against pursuing maximum yields at all costs.

Market Outlook:

Despite volatility, Ryder remains optimistic, noting the economy and corporate profitability have been "pretty darn resilient."

Yield Trap Concern:

Magoon echoes these concerns, describing excessive yield-chasing as a "yield trap" where distribution numbers shouldn't drive investment decisions.

Market Implications:

The guidance suggests defensive positioning through dividend stocks and bonds may expose retail investors to hidden risks and opportunity costs during volatile periods. The total-return philosophy prioritizes balanced portfolio construction over immediate income generation, potentially better positioning investors for long-term market cycles.

Sectors Mentioned: Fixed income, dividend-paying equities, high-yield bonds, investment-grade bonds, ETFs.