While there can be no assurances of success there of course have been long stretches where market growth has been low single digits and of course there will be such periods again which creates the possibility that now is one of those times.
Times of low returns, whether that is now or not, requires broader investment horizons terms going back to asset allocation and considering asset classes that seem to be less important in a five year stretch where the S&P 500 goes up 143% but are crucial in periods like the five years going into the March 2009 low when the S&P 500 was down 33%.
This can include absolute return, foreign equities, select hedge fund replication (some of these do work well), funds that employ some sort of screening methodology to build a portfolio (these could be just as important for what they avoid as what they include), options strategies, commodities and even currencies.
Portfolio success from that five year period going into 2009 came from including these other assets, assets which have been shunned since for not keeping up with US equities. No asset class will lead forever and no asset class will lag forever and the next time domestic equities rotate out of favor clients will expect advisors to have a plan to mitigate that environment and it will likely have to include the above mentioned out of favor market segments.
Source: Google Finance
This article was written by AdvisorShares ETF Strategist Roger Nusbaum.