Faced with market declines or market gains, people tend to approach investing in predictable- although not necessarily logical – ways. These reactions tend to be counterproductive to long-term portfolio growth, and it is well-documented how individual investors have historically underperformed broad market indexes when left to their own emotion-driven decisions. Active management adds discipline, through professional money management, to the equation, resulting in the increased peace of mind so important to retirees.
Market bubbles are inevitable. Exploiting their opportunity and limiting their damage requires active management. When it comes to pursuing exceptional portfolio gains, there’s nothing better than a good market bubble. But what goes up inevitably comes down. One of the best quotes on that topic comes from market analyst John Mauldin, credited to one of his mentors: “Mr. Market is a vicious sadist. He will do whatever it takes to create the greatest amount of pain for the largest number of investors.” Active management is a tool for participating in the “bubble” with eyes wide open, while always keeping one eye on the exit door.
It’s hard to calculate how long today’s retirees might live, but the one thing they want to know is that their money will not run out before they do. Answering in the affirmative requires combining capital preservation with the opportunity for capital appreciation. While no investor or investment management style can predict the future, everyone requires the flexibility to respond to opportunity. Active management can offer that opportunity.
Source: ActiveManagersSource.Com