Forecast 2021: The Stock Market

A diversified portfolio of hedge funds significantly outperformed in the first decade. Not so much this last decade. There are two strategies to go into in this text today. Suffice it to say, I think the 2020's will once again be the decade of active management. The 2020's are going to be about rifle shots, not the shotgun approach of index funds.

This will be a decade to focus on absolute returns as opposed to relative returns. Passive index investing is a relative return strategy and I think it will be a very poor choice in the coming years. As my dad used to say, every dog has its day. Passive investing had the last decade. Active investing is getting ready to take the lead.

As I said last week, while I’m bearish on passive index funds, my own portfolio is almost fully invested. I own individual stocks, carefully selected with a long-time horizon. That’s my choice, but you and your advisor need to do your own due diligence and decision-making. In my own portfolio, I admit the irony in that I am somewhat buy-and-hold. I tend to make very specific and targeted investments, and then hold them. Some are for income and some are for growth.

And even as I am saying that I think the stock market is going down, the risk profile and aggressiveness of my own portfolio is probably more than it’s ever been. I find plenty of things to be very optimistic about.

In every bear market, there are individual positions that do well. Time will tell whether my own personal convictions will prove profitable. But you cannot look at my personal investment portfolio and call me bearish. I am extraordinarily bullish, just not on passive index funds. In a few weeks, if compliance permits, I’m going to write about my personal investment philosophy and positions. There are plenty of opportunities, though admittedly more for accredited investors than those with less than $1 million, but also some for those still accumulating portfolios.

I don’t know how to be clearer. Take your profits from passive investing. Taking profits is not alarmist. It used to be considered wise advice. As my friend Dennis Gartman used to sign off, “Good Luck and Good Trading.”

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