FOCUS: U.S. equitiesU.S. equity markets are hovering just below the 4,000 mark, down 17 per cent for the year but off their low-level point by 13 per cent. Push and pull action is represented by the seasonal camp , and the fundamentalists, who see inflation as persistent and a recession in early 2023. The put/call ratio within the options market shows the most bearish sentiment since 1997, paradoxically, a bullish signal for the market.
At Goodreid, we have always argued that the best way to invest is to focus on a long-term goal, multiple years down the road, which would relegate a 2023 recession into the “bump in the road” category. In the meantime, we practice prudent stock ownership, concentrating on active management, quality and diversification.
Looking back on 2022, one thing rang true and it has been a while since we've been able to really champion it. Active management has been a significant contributor to outperformance, beating passive investors significantly. Although many investors have run to the passive strategy of “buying an index,” 2022 proved that this approach is not a good one during uncertain and changing times.
With the growth of Exchange Traded Funds in the last decade, we have seen a similar increase in the prevalence of passive investing. And it is true that passive investing has had an impressive run in beating active managers. However, that claim comes with caveats. One is that the outperformance of passive investing in vehicles such as the S&P 500 Index can be attributed to just a handful of companies and those few companies have grown to a significant proportion of these passive holdings.
Top picks from a dog will do the same as well.