Does Staying the Course still work for you? | Tip of the Week | October 20, 2010 | No. 13
Many current investment strategies direct the client to invest assets while reducing risk through sensible diversification. This approach assumes that the best performing asset class will change each year and cannot be predicted.
We learned in 2008, when nearly all asset classes realized losses, that this approach may not work. Clients are fatigued with the current conditions of the investing marketplace and are demanding a more active approach to better protect their wealth. They have ridden the ride of the past decade of bubbles, then following corrections, and are questioning the traditional buy-and-hold approach. We can agree that the nature of investing has dramatically changed over the past 10-20 years. Specifically, the advances in technology have allowed for increased trading volume and volatility.
One solution to the buy-and-hold approach may be a tactical investment strategy that utilizes active management. Active investment strategies are ones that allocate assets to markets that are trending well and avoiding areas that are declining. These strategies consider Cash as a viable investment option, allowing for wealth preservation and reduction of risk. Investors should consider active tactical investing a permanent component of a well-diversified portfolio. With a large defensive cash position, investors will appreciate the proactive nature of tactical management the next time there is a large market decline.
Call us to find out more……
Questions or Comments?
Mark Vitek, CPA/PFS, CFP®
…until next week.