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

Paying for Health Care in Retirement

By Ryan Yamada, Senior Wealth Planner    When putting away for retirement, we often dream about all the things we’ll be able to do with that money – traveling, going out to eat, maybe trying new hobbies. 

Senate Addresses Taxes, Deficit, Inflation, Health Care in Proposed Bill

By Jamie Hopkins, Managing Director, Wealth Services  Sonu Varghese, Director, Investment Platforms; and Ryan Detrick, Chief Market Strategist, contributed to this report.    Senate Democrats have reached a general agreement on a bill to address climate change, taxes, health care, inflation …

Quarterly Market Outlook: What Lies Ahead for the Third Quarter of 2022?

By Scott Kubie, Senior Investment Strategist    The first half of the year proved challenging for even the most hardened of investors. High inflation. Continual losses in the S&P 500. Bear market. Fed rate hikes. It all added up to the third most volatile market in 25 years.  

Culture From the Top Down: Executive Compensation Plans Explained

By Craig Lemoine, Director of Consumer Investment Research At their most basic level, executive compensation plans are designed to attract, retain and motivate top talent and leadership. But truly successful plans are designed to be much more than providing a high salary to a key employee – …
1 2 3 103 104 105

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