Financial advisors have been increasingly insistent on their clients owning safe-haven assets which pay a yield. Therefore it is no surprise that investors have piled up, with extreme appetite, into US treasuries and defensive stocks.
The biggest losers have been the recent buyers of TLT and high quality bonds. TLT recently dropped to its lowest point in more than two months. This is an 8.6% capital loss from an all-time high of $132.15, on July 25, 2012. The recent owners of long-dated US Treasuries are absolutely stunned by such a steep decline in a short period of time. These latest buyers just refuse to sell anything which they have recently bought, particularly if they are in a net loss position. Further declines will eventually force such flock investors to shift into risk assets.
Many investors tend to move from one crisis to another. They ride an emotional rollercoaster in contrast to trading with reliable guidelines and an overall objective strategy. When investors are easily influenced by the media, the brokers, and friends, then they inevitably end up buying high and selling low. One of the biggest mistakes made by average investors is to buy anything that has been in an extended rally. Remember 1999, October 2007, or May 2011?
This recent inclination of financial advisors to preach the concept of recession-proof investments when everyone else is buying them is a hopeless proposition, especially when the mass is getting into defensive instruments. Those investors who follow the herd will consistently lose money.
These days investors want to avoid risk but there is no crystal ball or computer software to forecast the future. However, access to ETF Trade Advisor’s Member’s page enables investors to enter and exit the right instrument ahead of the herd, even ahead of the professional money managers. This type of crystal clear trading takes all the emotions and drama out of the decision making process. The result is consistent profits regardless of market conditions while preserving capital.