Yahoo Finance: “Active investing poised to be on the rise in 2023”

Yahoo Finance, Dec. 27, 2022 Marguerita Cheng, CFP® Pro is featured in today’s article by Yahoo Finance Senior Columnist  who writes: “As 2022 nears a wrap, a trend is emerging that’s expected to gain traction next year — actively managed investment strategies — along with a custom strategy for people who like the idea of investing in a basket of companies, but want more control of what they invest in. Assets in direct indexing are expected to climb to $825 billion by 2026, from roughly $462 billion now, according to Cerulli Associates, a global research and consulting firm, based in Boston, Mass. That tops growth forecasts for exchange-traded funds, mutual funds and separately managed accounts.”

Here’s what’s behind the developing shift: “Many analysts foresee loads of volatility for stocks in 2023, particularly early in the year, and an overall flat return scenario for the entire year, given the combo of still-high inflation, Fed rate hikes, and a potential recession. And some folks want more control.”

Marguerita explains: Direct-indexing enters the mainstream. Direct indexing lets investors cherry-pick which stocks to buy in a benchmark index instead of owning a fund that tracks a specific gauge like the S&P 500. A hands-on approach allows for you to adjust for changing market conditions in a turn-on-the-dime manner, something that is not in the cards for investors in passively managed retirement portfolios that mimic the ups and downs of whichever index is being tracked.

She says: “Direct indexing allows investors to buy the individual stocks in an index directly as opposed to owning a predetermined selection of stocks through a fund. Investors can customize their holdings to align with their risk tolerance and investment preferences. But there are some cons. Direct indexing, for example, can be more expensive than passive investing and may cause clients to lose focus of their long-term financial goals and encourage more frequent trading.”

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