In light of the financial devastation of 2008 and the recent May 6 “flash crash,” investors are becoming less fond of thinking long-term. The markets are dynamic, constantly shifting, and investors should utilize exchange traded fund (ETF) to adapt to the various market conditions.
Mellody Hobson, president of Ariel Investments LLC, though, rebuked the advisors for focusing on short-term changes, stating that they “are doing a disservice to investors by talking about short-term in general, and specifically about three-year returns.”
However, Al Gardner, a wealth manager at DeSeranno Wealth Planning, remarked that “clients who are planning to retire in the next few years can’t take another hit.”
The notion of buy-and-hold investing shows signs of falling out of favor. Ten years ago, 80% of advisors’ portfolios were buy-and-hold. Today, that’s 30%. That’s a promising development in that it shows a more tactical mindset is catching on, which is what we believe needs to happen. Investors can no longer ride out the recessions by hanging onto their investments as they rise or fall; anyone who did that and held onto the S&P in the last decade knows how much time can be lost. There does, however, need to be a strategy. A simple one that we use for our clients – trend following – is detailed here.