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

Let’s Talk About Midterm Elections and Your Investments

This week was midterm elections and we’ve had many questions about what it all could mean, which we’ll tackle in today’s blog. We consider it a great honor to vote, and while we may not know the final results of the election for days (or even months), what we do know is the election will …

3 Nontraditional Ways to Give That Still Qualify for a Tax Deduction

Kevin Oleszewski, Senior Wealth Planner ‘Tis the season to give. In fact, 37% of charitable giving occurs during the last quarter of the year — 20% of it in December alone, according to a survey conducted by the Blackbaud Institute. And while the holidays are traditionally a time to reflect …

Considering Tax Loss Harvesting? What You Need to Know First

Kevin Oleszewski, CFP® Senior Wealth Planner As the tax year draws to a close, many high-income investors will look to reposition their portfolios to intentionally generate losses as a way to offset gains — an investment strategy known as tax loss harvesting.
1 2 3 81 82 83

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