Stock picking isn’t dead. But for most investors it might as well be
New York (CNN Business) New data from S&P Dow Jones Indices showed that investors saved more than $400 billion in fees with index funds over the past quarter of a century.
“Diversified portfolios do okay usually, but they’ve been hit hard lately by the rise in rates,” said Shamik Dhar, chief economist at BNY Mellon Investment Management, in an interview with CNN Business. That is disorienting investors,” said Adam Hetts, global head of portfolio construction and strategy at Janus Henderson Investors, in an interview with CNN Business.
New York ( CNN Business ) What’s the best way to invest? Plenty of active traders are out there trying to make a quick buck on meme stocks like AMC and GameStop , fads like Snap and Peloton or bitcoin and other cryptocurrencies. Professional money managers try to identify stocks that can beat the broader market over the long haul.But for most individual investors , a strategy of buying and holding so-called passive funds that track top indexes like the S&P 500 and Nasdaq 100 makes the most sense if you want to accumulate wealth for retirement. It’s like that popular old rotisserie chicken infomercial slogan: Set it and forget it. Index funds tend to be cheaper. New data from S&P Dow Jones Indices showed that investors saved more than $400 billion in fees with index funds over the past quarter of a century.The company, along with competitors like iShares ownerand index provider, offers many options for investors looking to get exposure to the broader market without trying to pick individual winners and losers.”I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers,” he wrote.And given how some high-profile active investors have lagged the market lately, there is something to be said for conservative investors with a long-term horizon betting on the S&P 500 over a handful of stocks.
Both active and passive investing haven’t worked this year
Of course, buying index funds is no guarantee of investing success either…especially not in the short-term. After all, the S&P 500 has plunged this year, too.”Diversified portfolios do okay usually, but they’ve been hit hard lately by the rise in rates,” said Shamik Dhar, chief economist at BNY Mellon Investment Management, in an interview with CNN Business .”This year, it seems like there has been a broad-based source of fear. It’s shock therapy. There is slowing growth and inflation. That is disorienting investors ,” said Adam Hetts, global head of portfolio construction and strategy at Janus Henderson Investors, in an interview with CNN Business .
That’s why some investors aren’t singing a funeral dirge for active stock picking — just yet.
“A 10-year ‘secular bear market’ is underway,” said Stifel chief equity strategist Barry Bannister in a recent report, who predicts that the market may be stuck in a narrow range throughout the rest of the decade.
