There are many different ways to manage a portfolio, all with varying degrees of success and failure. Most investors subscribe to a passive buy-and-hold investment style.  It's very difficult for an actively managed account to beat an index investment if the market is in a strong and sustained up move lasting many years. 

For example, the biggest bull market in stock market history took place between early August of 1982 through mid-September of the year 2000.  This was an 18 year period during which the S&P 500 gained close to 1252%.  That's a gain of over 15.07% per year on an annualized basis.  During those 18 years your best bet was to buy and hold an index and just hang on. 

Unfortunately, bull markets like the one we experienced from 1982 through mid-September 2000 happen once in a life time.  The rest of the time investors are confronted with bull and bear market cycles that are like navigating a mine field.  This is why a one-dimensional approach that takes the least effort to implement like passive index investing carries with it a great deal of risk.

Bear markets always reveal the flaws associated with passive index investing. 
The damage done to a portfolio during a bear market can cripple returns for years after the end of the bear market because stock market returns are asymmetric.  This means if you start with $100 dollars and lose 50% of it during a severe market correction then you need to make a 100% gain on your investments just to break even and crawl back to where you started before the bear market began. 

Historically, bear market cycles pop up in the stock market every 7 -10 years.   For example, the NASDAQ Composite lost 78% of its value from March 10, 2000 through October 9, 2002.  The major market indexes were crushed again from October 29, 2007 through March 9, 2009 when the NASDAQ Composite lost 55% of its value and the S&P 500 lost 56% of its value. 

The value of an active manager is their ability to reduce overall portfolio volatility during bear market cycles so that the portfolio rebuilding phase after a bear market is quicker and real overall gains can be achieved faster.  By its very nature an active management style seeks to dampen out market volatility and therefore smooth out a total portfolios equity line.  A tactical active management style gains its outperformance by missing many of the bad days, weeks or months in the market while participating in the good days, weeks and months.  Often, a tactical asset allocation will not keep up with the indexes when the market is range bound or non-directional, but a skilled active manager can beat the market over time by avoiding the worst periods and investing in equities during the bull phases.

Retirement Maximizer, Inc. represents tactical money managers who have proven their skill successfully navigating bull and bear market cycles.

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Disclaimer: Nothing in this posting should be considered personalized investment advice. These comments are of a general nature and may not apply to your particular situation.