Selecting Investment Strategies

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

Published by Jake Bleicher and the Carson Wealth Investment Committee

A fundamental decision made when selecting an investment strategy is whether to invest actively or passively. Given that more than $1.1 trillion have flowed into passive funds since 2008 while active funds have seen a slight decline(1), perhaps the decision is quite simple. Several years of weak active investment performance only support the passive pundit’s notion that you can’t beat the index. While journalists have already written fund manager’s obituaries, history suggests active and passive investment strategies are more cyclical in nature. Like most cyclical investments, following the herd rarely ends well.

Investors tend to focus on recently observed patterns and assume them to be the new normal. Like any cyclical investment, it goes back and forth.

There is no definitive criterion that determines which style will outperform. Some believe that active outperforms during market corrections and over the last 30 years that has proven true 77% of the time1. Other research suggests that active outperforms when small caps beat large caps. Regardless of the merit behind these observations, it would only benefit investors who could predict such scenarios unfolding. Active or passive, few investors accurately predict the next market correction.

One approach would be to incorporate both into an investment strategy, effectively hedging the cyclical nature of the relative performance. However, I think recent history provides ample evidence to support an active strategy. The excitement about passive investing has gotten extreme, maybe even irrational. It reminds me of a bubble. When selecting an investment strategy, be cognizant of the cyclical nature between active and passive performance. When one strategy has enjoyed supremacy for nearly a decade, perhaps its time to go with the out of favor method.

Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

Retirement Funding: More than a 401k Account

Published by Mark Petersen People have many different ways of saving for retirement. One may utilize pre-tax or post tax savings, invest in appreciating assets or collectibles or even allocate money to assets which may simply maintain their value over time.

Creating an Enduring, Intangible Legacy

Published by Beth Schanou, Creating a lasting legacy requires more than legal documents transferring material assets. Although a considerable amount of time is spent on the estate planning process, often the transfer of wisdom, insight, experience and other similar intangibles are not considered.

A Life Defined Starts Here

Many people set goals, yet on average they only attempt them less than once. Those who do reach their goals attribute their success to setting tangible, measurable objectives – and pursuing them with focus and determination, even when faced with challenges. Click here to open fullscreen
1 2 3 87 88 89 90

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation