Vanguard’s Fran Kinniry Talks Concentration Risk
Why investors should "buy the haystack" instead of searching for the proverbial needle.
In this episode of Advisor Insider, Fran Kinniry, head of the Investment Advisory Research Center with Vanguard’s Financial Advisor Services, talks about portfolio management in the context of the current market environment.
Leaning on a classic Vanguard Group mantra, Kinniry explains the potential for concentration risk and why investors should “buy the haystack” instead of wasting time searching for the proverbial needle in the haystack.
“Very much like owning the haystack, a wise strategy is not trying to time the market,” he said, citing “bear markets that are created by market timing.”
On the Fed and interest rates, Kinniry offers a unique take on the more than $6 trillion worth of cash on the sidelines, suggesting it’s not the outlier some market watchers have suggested. In the context of all money invested across stocks, bonds and money markets, that $6 trillion represents about 19% of all invested assets, which is below the historic average of 24%.
“It’s probably a normal allocation to cash right now,” he said.
However, there are multiple ways to put money to work in this market and a big part of that is psychological. “Math shows it’s better to go all in at once,” he said. “But dollar-cost-averaging is a behavioral strategy not a mathematical strategy.”