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One of the most basic decisions a planner must make is whether to follow a passive or active approach to managing client portfolios. Advisers using a passive or strategic approach ignore market noise and minimize fees and taxes by executing no trades beyond occasional rebalancing to a model or bench...

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Bibliographic Details
Published in:Financial planning (Atlanta, Ga.) Ga.), 2006-03, p.1
Main Author: Kenneth R. Solow and Michael E. Kitces
Format: Magazinearticle
Language:English
Subjects:
Asset allocation
Economic conditions
Energy economics
Financial planners
Interest rates
Investments
Limited liability companies
Manufacturing
Market timing
Noise
Portfolio management
Securities markets
Stock exchanges
Unemployment
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Summary:One of the most basic decisions a planner must make is whether to follow a passive or active approach to managing client portfolios. Advisers using a passive or strategic approach ignore market noise and minimize fees and taxes by executing no trades beyond occasional rebalancing to a model or benchmark portfolio. In contrast, advisers with an active or tactical bent embrace market noise because they believe it provides the opportunity to add value above and beyond benchmark returns. Technical analysis has become a fact of life for most active money managers. Even institutional money managers who are most focused on fundamental analysis tend to use technical indicators when entering or exiting positions, although they are sometimes reluctant to admit it. Advisers should understand the basics of trend analysis, chart patterns, investor sentiment indicators and so on, even if they decide not to utilize them in their decision-making process.
ISSN:0746-7915