The passive investor: go aggressive or go safe? – The Average Joe
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    The passive investor: go aggressive or go safe?

    victorlei

    September 22, 2022

    60.9% of investors surveyed by the AAII are feeling bearish over the markets in the following six months — the highest since 2009. Who can blame them? One week it’s inflation, the next, it’s a housing recession.

    With markets down 20% this year, investors are questioning whether they should play it safe or take advantage of lower prices in higher-risk assets…

    Here are some options for passive investors:

    1/ Stay the course with an ETF that tracks the S&P 500 — like the SPDR S&P 500 ETF Trust (NYSE:SPY).

    • The case for $SPY: For stocks, few options are as safe as exposure to 500 of the largest U.S. stocks, and it’s likely the best option for most investors.
    • If markets go down even further, you’ll feel at ease. If markets go up, you’ll get FOMO. Still, a 10% return each year on average doesn’t sound so bad.

    2/ Get more concentrated into sectors that are more sensitive to the economy. The Invesco QQQ Trust (NASDAQ:QQQ) tracks the NASDAQ-100 — which holds 102 positions:

    • Heavy concentration in: Technology (55.10%) and Consumer Discretionary (21.55%) sectors.
    • The rest spread between: Health Care (6.20%), Industrials (5.75%) or Telecommunications (5.10%) and others except non-financial companies.
    • The case for QQQ: The Consumer Discretionary and Tech sectors tend to lead the way after a recession.

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