Investing isn’t what it used to be

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One of the keys to a happy healthy retirement in the future is “living within your means,” now — so there’s money to save and invest.

And for all the investors who thought they were doing the right thing — spending sensibly, saving prodigiously and investing steadily — but still were beaten soundly by Wall Street, there are other options for the future.

“The traditional buy-and-hold strategy was popular during the ’80s and ’90s — when it worked well,” said David Bullock, president/founder of Bullock Capital Alliance. “But this strategy has not worked well during the last 10 years. In hindsight, if an investor had used some type of active investment strategy, their portfolio over the last decade might have been less volatile and had higher returns.”

Active investment strategies include market timing, individual stock selection and sector rotation strategies, he said.

“We’re at a crossroads. Buy-and-hold didn’t work (during this steep market downturn), while some active investment strategies have worked recently,” Bullock said. “But picking the one perfect strategy is hard, if not impossible. Rather than throwing the baby out with the bathwater and abandoning buy-and-hold, which will work again in the future, some people are adopting a hybrid of buy-and-hold — with an overlay of active investment strategies.”

It’s a means of taking diversification one step further, and “could be a way to protect against volatility. Adding the active piece to overall asset allocation makes a portfolio more adaptive,” Bullock said.

An investor can cash out part of a portfolio if he or she needs to.

If the buy-and-hold side of a portfolio is doing well, then it’s time to rebalance and put more money into the active, underperforming, side of the portfolio.

Active strategies and buy-and-hold will likely balance each other during highs and lows.

When stocks are too hot — it’s time to buy bonds or cash and keep a static asset allocation.

“It’s counter-intuitive to take money from one strategy that’s doing well — and put the winners into the strategy that’s underperforming,” Bullock said.

But that’s precisely what keeps volatility more manageable in a portfolio.

And, ironically, investors will receive clear signs when it’s time to dump some stocks in favor of bonds or cash vehicles.

“When you’re getting stock tips from your hairstylist and your plumber, it’s time to sell,” said Denisa Tova, founder and CEO of DaVinci Financial Planning Inc. “Sell when it appears things can’t get any better — like in 1999.”

Contrary to pre-recession popular belief, “Investing is not supposed to be comfortable — it’s supposed to be about your goals,” she said. “You have to have discipline — there’s nothing sexy about investing.”