Active Management is not Day Trading

"By LouAnn Schulfer, AWMA®, AIF® “The Wealth InFormation Lady”, Accredited Wealth Management AdvisorSM, Accredited Investment Fiduciary® , Published Author" |

We have practiced active management of investment portfolios for over 20 years. The opposite of active is passive management of investments, or “set it and forget it”, such as buying a fund and not changing anything regardless of the market or economic outlook.

 

There are different styles of active management.  Our models blend fundamental analysis, technical indicators, and valuation (price) into the decision-making process.  Actively managed portfolios invest in certain sectors of the market and avoid other areas, with an outlook of anywhere between several months to a few years, making adjustments as the outlook changes.

 

Active management should not be confused with day trading, where one would get in and out of their investments with swift reaction.  Case in point.  Think back a few years ago.  I remember my day vividly on March 17, 2020, discussing shock of the news with clients during a review. Unprecedented announcements had just been made of mandatory shutdowns of huge segments of our economy due to the Corona virus.  Restaurants, bars, theaters, sporting events, offices, schools, hair salons, and many retail spaces were completely closed by government mandate for an unknown period of time.  If you were to react swiftly to this news, when would you have “gotten out” of the market?  That day? The next?  The S&P actually began its swift drop on February 11th, five weeks prior!  So then, when would you have gotten back “in”?  When stores began to open? When Main Street began to bustle?  The S&P began its ascent back up on March 24th of that year, just one week after the shutdowns.  The point is, there is not a human or an algorithm that can pin-point the day to get “out” and importantly, to get back “in”.  Shifts to certain areas within a portfolio are what impacted return over the market cycle to follow.  That is considered active management, which is not to be confused with day trading.

 

LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com  SchulferAndAssociates.com , or louann.biz

 

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