Yikes! If you’ve been reading headlines or watching the news, you might be concerned about the state of the stock market. The market has a lot of people feeling nervous about volatility, particularly with regards to their retirement plans.
What is the solution to reducing market volatility and at the same time grow your assets? I submit to you that the old method of “buy and hold” approach to portfolio management no longer works for the individual investor. Investors who had $500,000 in the NASDAQ Composite back in March 2000 when it reached a high of 5,048 lost big when it crashed in October 2002 at 1,108 during the dotcom bust. The NASDAQ has reached the 5,000 level again in July 2015; this means that all the investors who left their money in the tech-driven index are back to breakeven only having $500,000. However, the goal to investing is to grow your assets over time and not to get back to breakeven.
Therefore, I believe there is a better way to manage your portfolio through tactical portfolio management. For example, if you miss the 10 best days on the S&P 500 (1995 – 2014) you gave up more than 50% of performance. However, if you avoided the 10 worst days (1995– 2014) you gave up more than 135% of performance. Tactical portfolio management is a strategy that allows investors to actively respond and profit when the market is trending upward and at the same time mitigate risk when the market is trending downward. It’s quite different from the “buy and hold” approach that limits your exposure when the market takes a downward turn. Markets don’t always go up every year and the typical investor does not understand the overwhelming effect losses have on their portfolio. By focusing on downside protection in a bear market and participating in gains within a bull market the investor is able to have a positive effect long-term on their portfolio growth. With tactical portfolio management investors do not have to worry about life-changing losses within their portfolio because they know a plan is in place to protect their assets.
As I write this article the majority of the major market indexes are in negative territory year to date. However, many of the tactical managers we utilize are positive for the year.
To learn more about Blake Fambrough and his approach to Tactical Portfolio Management, view his Paladin Registry profile.
Other posts from Blake Fambrough
Did you know that nine out of ten people age 65 and older are receiving Social Security benefits? ...
In today’s world there is a lot of noise regarding do-it-yourself investing. If you Google “Do-it Yourself-Investing”, over...
President Harry Truman quoted “If you can’t convince them, confuse them”. In the financial planning world this statement...