Active Money Management
When speaking with potential clients about their current relationship with an investment adviser, they often describe a scenario that goes something like this: They only hear from their adviser at the end of the year review. Most of the time, it is steady as she goes. But then there might be the week that the markets are down 8%. They then get a call from their adviser asking, “what do you want to do?” We all know that the market is very uncertain, but what are you paying those fees for if you are the one having to make the tough decisions? Or even worse, why are you paying those fees, if no decisions are being made with regards to your portfolio?
Let’s face it. This is not the bull market of the 1980’s and 1990’s when a passive approach (i.e., buy and hold) was a winning strategy. Since 2000, investors have weathered 2 bear markets, experienced a lot of angst, and have little to show for their efforts. In hindsight, a more active approach was required, but going forward, this will likely be true as well. Few of us remember investing in the 1960’s and 1970’s, but the Dow Industrials went nowhere for 20 years, and recent research by the Federal Reserve suggests similar such dynamics as an aging baby boomer population looks to take money out of the stock market as opposed to invest.
Clearly, a more active approach is required, but active doesn’t mean you have to be a day trader. In fact, I would highly discourage such activity not only because it is costly (i.e., all those trades cost money), but it is also very difficult to do consistently well. Active money management could be something as simple as rebalancing your portfolio on a periodic basis like every month or even yearly. With rebalancing you are taking money away from your winners and investing in your losers. Such an approach would likely reduce portfolio volatility without sacrificing gains. In other words, you would avoid the big losses while achieving market beating returns.
Employing strategies to navigate the market means you are active. Active doesn’t mean you are a day trader. All you want and (should expect I might add) are strategies (or expert advice) that allocate investment funds towards assets with the greatest potential for appreciation and away from asset classes with the greatest potential for loss. And in today’s market, there is no reason that your portfolio should only contain stocks and bonds. Investors have access to multiple markets and trading products that have created multiple opportunities for those willing to exploit such an approach.
At ARL Advisers, LLC we have developed many proprietary trading models in our quest to outperform, and we utilize this research driven methodology to determine those factors which lead to sustainable moves in the markets.