Choosing an Investment Strategy

Ultimately, our client’s financial goal is the single biggest factor when it comes to determining an investment strategy. When it comes to bonds, we can utilize active investment management strategies that are formulated to outperform the market.  Active investment managers exploit market inefficiencies by purchasing securities that are undervalued or by short selling securities that are overvalued. Either of these methods may be used alone or in combination. Depending on the goals of the specific investment portfolio, active management may also serve to create less volatility (or risk) than the benchmark index. The reduction of risk may be instead of, or in addition to, the goal of creating an investment return greater than the benchmark.

We can also work within the boundaries of passive investment management, which is a financial strategy in which an investor (or a fund manager) invests in accordance with a pre-determined strategy that doesn’t entail any forecasting (e.g., any use of market timing would not qualify as passive management). The idea is to minimize investing fees and to avoid the adverse consequences of failing to correctly anticipate the future. The most popular method is to mimic the performance of an externally specified index.

Fixed Income Best Practices