It’s hard to say whether the flood of cash into index investments today is a testament to investors’ confidence that markets will never have to weather another serious decline, or a belief that index funds will behave differently this time if conditions take a turn for the worse.
Maybe investors have simply forgotten what it feels like to have so much money washed away. After all, it’s been a little over 7½ years since the last market peak.
Of course, passively following an index is not the only way to invest, and mimicking the S&P 500 – or any index – is not the approach we have taken with the client assets under our care. We don’t know when the next deluge of bad news will rain down on the market, or whether the account values of index-following investors will be left seriously under water when it does. But we do know that we will continue to follow the disciplined, responsive, risk-managed process we’ve used for our clients for more than 20 years, because trying our best to protect the value of our clients’ accounts under any conditions has always been our policy.
Gary E. Stroik, CFP is vice president and chief investment officer of WBI Investments, Inc., which manages $3 billion for individuals and advisors. He can be reached throughwww.wbiinvestments.com or [email protected]