Tuesday March 9th, 2021
What’s the Best Investment Strategy
One of the things I am frequently asked is, “What’s the best investment strategy?”
It’s sort of a trick question, but I always answer the same…there is no best strategy. What works for you may not work for someone else. I also remind people that there is no such thing as a crystal ball. We can not predict the future and those who tell you with certainty they can predict the stock market are lying to you.
In the quest for stock market returns, people fall for all different types of investment ideas. Some of them are legitimate and some are scams. Some work and some may not work. Some seem too good to be true, and aren’t, but others are actually pretty good. However, there is no one strategy that is always better than everything else.
Here’s what I do know for certain. When things are going good, nobody worries. When I look at the market and I see a “green” day, nobody worries. However, when the day is “red”…some people get nervous. For those of you who never check the markets, positive days are illustrated in green numbers and negative days are red.
Inevitably, when we have a few red days in a row, I will get an email or a call from someone asking if we need to do anything different.
The answer 99% of the time is no. We don’t need to change a long term strategy because the market is having a rough day, a rough month, or even a rough year. However, remaining disciplined is difficult for many people.
Traditional investing really consists of 2 main investment styles…active management and passive management. In the most simple terms, an active manager does more buying and selling inside a portfolio and a passive manager has more of a buy and hold style and systematically rebalances.
I have never been a fan of active management as a the only strategy someone should use. In my opinion, many times this type of strategy is more speculative in nature and most retirees and pre-retirees don’t have the stomach for that kind of ride.
For this reason, a majority of our clients are with a strategic manager that uses a passive strategy. These managers design well diversified portfolios and have a very disciplined investment strategy that calls for systematic rebalancing at predetermined times. They don’t make changes every time the market hiccups.
For some time, I have been looking at other strategies that I could possibly use alongside our current models. I am excited to tell you about an additional strategy that we are now incorporating for our clients. I am calling this a “hybrid” investment strategy and I think it makes sense for a portion of a portfolio.
I recorded a short video to explain the basics of the strategy so you can understand the differences in this new hybrid strategy and the traditional active and passive strategies. You can click HERE to watch it.
Remember, no strategy is always going to be the best strategy for everyone. However, the best strategy for you is the one you can stick with long term. If you want to discuss adding this to your portfolio, click here to schedule a call with me to discuss.
Have a great week!