In 2006, net assets in ETFs totaled $432 billion. By February of this year there are more than 1,000 ETFs in existence with total assets exceeding $1.2 trillion, according to Morningstar. Yet many investment advisors still do not use ETFs in their clients’ portfolios. In fact, their clients may be more enthusiastic about ETFs than they are.
“Active management” is where the advisor focuses on performance related to risk and downside losses. An active advisor seeks above average risk-adjusted returns over time, by taking advantage of the inefficiencies within the market, and by anticipating correctly the changing economic conditions and outlook. Over time, an active management advisor should offer better risk-adjusted performance for the client.
Tags: active management, advisor, aum
Markets can only do three things – go up, go down, or go sideways – and it is impossible to always predict where the market is going. Advisors therefore are left with two options: ‘buy & hold’ and hope for a long term uptrend, or try to ‘time’ the market and essentially attempt to guess which way it’s going to go. Neither approach has been successful for the majority of individuals or professionals. Diversifying a clients’ portfolio attempts to take the guess work out of market direction by placing assets in the portfolio that perform well in at least one of the three market conditions.
Advisors understand the value of not placing all their clients’ eggs in one basket. With multiple baskets, if one drops and breaks the eggs, it’s better to lose some of the eggs than all of them. Similarly, many advisors strive to reduce the volatility of their clients’ portfolios by not having 100% of their investments in only one asset class. Whether using multi-asset mutual funds or individually selected stocks, bonds, precious metals, and/or exchange trade funds (ETFs), advisors feel comfortable knowing their clients’ diversified portfolios will weather the ebbs and flows caused by volatility in the market, right?
Tags: advisor, volatility
March 9th marked the 3 year anniversary of the current bull market. The S&P 500 has scored an impressive 110% run-up, and I think we can officially declare that the dreaded double dip recession didn’t happen.