Quote:
Originally Posted by BayMoWe335
Quote:
Originally Posted by qba335i
Portfolio manager (PM) controls the asset allocation (not only stock selection) And asset allocation drives the returns. As you know the industry is going away from individual stocks towards index mutual funds/etfs. The goals driven investing goes a step further and manages goals/needs vs expected returns.
Bonds serve a purpose. They reduce the overall volatility of the portfolio, provide current income and can be used as portfolio reserve.
When the market turns down (like 2008) you see the benefits of diversification. Bonds returned ~5%, gold ~5.5% and cash ~1.8% (vs -53% Emerging markets or -37% US equities). In theory this seems pretty straightforward to keep buying more when the market dips - unfortunately most people sell on the downside and never recover. PM can also manage the client and control his emotions.
As I said before, in a bull market everyone is a professional investor. It was easy to trade the US market for the last 9-10 years as we he a huge outperformance. Let's see if this will persist going forward - usually thing revert to the mean and money shifts fast.
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You should never "trade" the market. It doesn't work, period. Bull markets are great, but I like bear markets too because I'm a net buyer of stocks. I get to buy more.
I know what a bond is...they are inferior to stocks. Sure, it reduces volatility, but it also produces crap returns if you have a long term horizon. There are always exceptions, but long term money you have invested needs to be in stocks. You don't sell when markets are down...you buy more. I couldn't care less if stocks are down 40% because I don't sell at the bottom. They are paper losses until you sell.
I invested through 2007-2009 too. Loved it...picked up shares at better prices and rode them all the way up. Buying more as we drop here. If I need some income, I can sell a few shares here and there.
You're making this too hard. If you never stop buying, you never lose. I buy more when stocks drop, so I like it when the market is down. No one needs a portfolio manager to execute such a basic, working strategy. |
Trading the market works when we consider tactical shifts. I work for a major firm and we offer both strategic and tactical asset allocations. There are times when you want to reduce risk and there are times when you want to increase risk. Having 100% of assets in SPX is not prudent.
For equities: do you only invest in US or also add international and emerging? Growth vs value? What sectors? Large or small cap? Maybe factor based? There are a lot of considerations when we talk about optimal portfolio.