Is This Your Doctor?

I’m not saying I’ve never googled a medical problem, but while it’s a good source of information, real medical advice is coming from a professional doctor. Why then are so many investors entrusting their wealth to passively invested exchange traded funds and portfolios?

Only actively managed focus on value and diligent investing strategies.

Here is another case for actively managed money.

In advance of election day, no poles gave any indication there would be a Trump victory. It was an upset of epic proportion. Once it became clear, futures markets plunged. By the next morning however markets had gone all the way back up. All within a 12-hour span.

Investors went from OMG the sky is falling to this is the greatest thing ever. Trump is going to going to lower corporate taxes, reform individual taxes, repeal and replace health care, roll back banking regulations, launch a trillion-dollar infrastructure package and magically return GDP to 4%. Markets were up over 9% in the six weeks post election night.

In addition, investors no longer felt they needed the safety trade. They dumped bonds and gold holdings. That safe bond portfolio was down 11%. And Gold fell 14% in the same 6-week period.

But eventually sober second thoughts sank in. Trump hasn’t been able to accomplish the campaign promises we mentioned. Bonds and gold rebound, proving you still need safe haven assets in your portfolio.

There is a tendency for markets to overreact in the immediate aftermath of news - before they have fully assessed the situation and analyzed the information and data. This shows the inefficiency upon which active managers can seize and take advantage.

For more information on the impact of passively managed money on markets and investment returns read The Case For Active management, The Upcoming Market Crash, Are you swimming naked?, It's Gonna Be Worse, In Case You Forgot Rule Number One, & You're Behaving Badly.

Copyright KAV Wealth Strategies