Active Risk Management
Passive investing strategies (investments that match market returns) are increasingly popular, but people forget what happens when cyclical markets experience significant downturns. We saw this after the dot.com bubble and most recently in 2008. Investors watched the value of their accounts decline 25% or more in a matter of months.
Markets generally go back up after big declines, but it could take several years just to recover from losses. The role of active risk management is to minimize the impact of those declines.
Most advisors employ a “diversified buy and hold” approach to investing. While this works when the market is going up, these advisors are usually not prepared for the next down cycle. When the next bear market appears, and losses start increasing, many advisors simply tell their clients to “sit tight”. Or, some advisors simply minimize client contact during these times.
At Pacific, we believe you deserve more. We don’t agree with this approach, especially for clients approaching retirement or already in retirement. Can you imagine suffering a big loss the year you are scheduled to retire? If you are in your 30’s you have time to recover losses. If you are in your 60’s or 70’s you may not have the luxury of time. That’s why we offer our clients an alternate way of investing using active risk management.
Better Results Require Effective Risk Management
As hands-on money managers, we focus on managing risk. While our goal is to capture returns during rising markets, we especially focus on limiting losses during declining markets. This active risk management enables us to deliver more consistent returns during rising, falling, and flat markets.
Our risk management tactics emphasize:
- Choosing high quality stocks and bonds
- Building and managing highly diversified portfolios
- Hedging against market declines when volatility increases
- Rebalancing asset weights to reduce risk
Learn more about our investment approach here.