Active investment management’s weekly magazine for fee-based advisors

Lanny Marks, CPA, CFP, AEP • Boca Raton, FL.
Marks & Associates • Securities America Inc.

I think most financial professionals of my generation were introduced to the business when it was dominated by stocks, bonds, mutual funds, buy-and-hold strategies, and basic equity-bond diversification. In general, this worked well before this century. There is still a lot to be said for buying quality investments and letting them work for you. For the long-term investor with discipline, time is your ally.

But a lot has changed since the 1990s. Technology has hugely impacted how markets operate. We have seen periods of both robust bullish trends and great market displacement and steep drawdowns to a buy-and-hold portfolio. The interest-rate and fixed-income environments have changed dramatically since the financial crisis. And there has been a leap forward in sophisticated, risk-managed strategies that can deliver competitive returns while seeking downside protection during volatile periods or true bear markets. 

I tell clients that the benefit of using an active investment manager is that they are constantly monitoring the investment landscape—using both artificial and human intelligence—to determine whether changes in portfolio investments should occur. The problem we all have is that we fall in love with our investments and cannot decide when to sell despite all of the warning signs. We sometimes make decisions with our heart and gut rather than with our head. 

Active portfolio management is designed to help evaluate and adjust investment allocations based on empirical information, not emotion. This approach seeks to avoid deep portfolio declines during difficult market periods and to become invested again when the market begins to show positive signs. I tell clients that no methodology always knows the perfect time to jump in or out of the market. But I do believe we can enhance the probabilities for success by using quantitative, rules-based strategic approaches.

Of course, everything we do is dependent on each individual client’s investment objectives, risk profile, time horizon, and other factors, so allocations to active strategies might vary greatly from client to client. I review with clients many different investment alternatives and strategies, seeking common ground on what best meets the needs of their situation, attitude and capacity regarding risk, and overall comfort level with the specifics of any investment.

In addition to actively managed equity and/or fixed-income strategies, a client’s specific investment plan might also include fixed, CD-like investment alternatives with a guaranteed interest-rate return for a specified term; indexed or index-linked investment products that generally provide some exposure to equity market gains, with different options on levels of downside protection; variable investment products via mutual funds that provide full exposure to market gains and losses; real estate investment trusts (REITs); or guaranteed lifetime income products, which may include a long-term-care feature.

I believe, in general, that having several different investment strategies that complement each other can help clients progress toward their desired goals.

Disclosure: Securities offered through Securities America, Inc. (SAI), member of FINRA/SIPC. Investment advisory services offered through Securities America Advisors, Inc. (SAA). SAI and SAA are separately owned and other entities and/or marketing names, products or services referenced here are independent of SAI and SAA. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice. 301 NW Crawford Blvd., Suite 204, Boca Raton, FL 33432. (561) 750-0312.

Photography by Jennifer Jones.

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