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

10 Ways to Prepare for Retirement

Are you prepared for retirement? Planning and preparing for your next chapter well in advance is the best way to be ready – financial security doesn’t just happen without careful thought. When you plan ahead, you: Have the luxury of deciding when and how you will retire Know more about your …

When to Consider Selling Your Business to a Key Employee

Whether it’s because you want to keep the business “in the family” or because you suspect you will not be able to find a good buyer for your business, you might be thinking of selling your business to an employee. The first thing to look for is the kind of employee who can and should …

Why You Should Include Your Spouse In Key Business Decisions

Sometimes when planning the next chapter in your life, the most important people feel left out. Deciding to transition out of ownership of your business is one of the most important decisions a business owner can make, so it only makes sense to include your loved ones in that planning. How …

If You Love What You Do, Why Should You Plan Your Business Exit?

Many business owners love the companies they’ve founded, whether it’s because of the work they do, the changes they effect, the money their companies provide, or something else. When you carve out a comfort zone within your business, you might question why you would want to plan for your bu …
1 2 3 24 25 26 27 28 106 107 108

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