Why is Tactical important for better returns and less risk?
Gossameruses sophisticated Quant analysis to be ahead of market declines and marketupturns before they occur. Conversely,investment firms use lazy strategies that guarantee losses when markets declinebecause they are reactive and if they eventually recommend changes, the damagehas already been done. Soundfamiliar?
Even when the markets are behaving good, youare not making the most efficient use of your money. For example, and advisor might recommendallocating 40% of your portfolio to US Stocks. They accomplish this by investingin an S&P 500 index fund, mutual funds, or a combination of both.
.Here is why it is lazy and an inefficientuse of your money
The S&P 500 is made up of 11subsectors listed below:
Over the last 16 years, only 3 haveoutperformed more years than the S&P 500
- INFT 12 outof 16 yrs 25%underperforms
- COND10 of 16 38%underperforms Outperformed more yearsthan the S&P 500
- REAL 8 50%underperforms
- HLTH 8 50%underperforms Performs equal number of years as the S&P
- FINL 8 50%underperforms
- MATR 6 out of 16 63%underperforms
- UTIL 6 63%underperforms
- ENRS 5 69%underperforms Underperperformed more years than the S&P
- INDU 4 75%underperforms
- CONS 4 75%underperforms
Do you remember the paralyzing feeling of2022 ? Were you told “remember, this isa long term investment plan”, or “everyone is experiencing the same losses”. You probably accepted it because yourfriends, neighbors, and co-workers were all in the same boat.
I want to embed this interactive chart forcimmentary
https://novelinvestor.com/sector-performance/
Energy sector as an example:
2018, 2019, 2020 – impact of eliminatingthis sector, then adding it in 2021 and 2022.
