BUY & HOLD STRATEGY OR ACTIVELY MANAGED PORTFOLIO?

Which is the best. That great debate has been with us for many decades. I don’t believe is a black and white dilemma. Mr. Market is more complete that one system could work forever. So my bet is sometimes we have to use buy&hold strategy, sometimes use active management. But when and which. That is the one million dollar question.

Basically we have harder life with actively managed portfolio, we have to work, analyze, think and trade much. If you are buy&hold strategist, you have to only sit and wait and as W. Buffett recommends unplug your computer, internet and TV.

The key question is that. Are we better to pick individual stocks or we have to buy only indexes. Honestly I am skeptical that we can be smarter than the market, but I have some informations about that so many hedge funds and managers beat the market in long term. But for a general investor is almost impossible mission to beat the indexes. We are – including me – very bad market timers. We are jumping into positions too early or too late. Perfect timing I guess doesn’t exist. It is only question of luck.

In 2013 the buy & hold strategy worked perfectly, SP500 gained with 30%. If you bought that index you made more than a reasonable profit. But I wouldn’t say the active management is dead, I just mark here it fits only for pro traders. And, in this bullish rally the active management might not be the best strategy. But the point is that we never know when is trend in the market like this year or just moving sideways.

In 2013 the hedge fund industry massively underperforms, their 7,1% gain is against the SP500 30%. That is a huge number and honestly so disappointing about the quality of most money manager’s job and expertise. This year our company made more than 49%, so we overperformed the market.

All in all there is a majority of funds who underperform, but some like us overperform the market with active management. The active management strategy is not dead at all.

The BFM Assets Team.