Back when he was in his thirties, Hans Olsen, chief investment officer of private client services at JP Morgan's private banking division, decided to take up Asian-style boxing. "I needed to do something different to keep my mind clear and focused on the job," he says. Training under a master kickboxer, Olsen became a mid-level fighter and—to his surprise—picked up some thoughts about how to manage clients' investment portfolios during tumultuous times like these. When the old rules-buying-and-holding, diversifying in order to reduce risk—seemed to no longer apply, the lessons learned during intensive athletic training kicked in. "A good athlete is strong, has endurance, and skill and technical proficiency at the core," Olsen explains. "In this environment, a good portfolio is one that rides out storms and takes advantage of opportunities—one that demonstrates just that same kind of strength, flexibility and endurance."

Welcome to the era of the athletic portfolio, the kind that's able to deliver maximum performance with grace, efficiency, power and a minimum of drama. Top athletes like Derek Jeter on the baseball field, Shaquille O'Neal on the basketball court or Michael Phelps in the pool are able to deliver that extra bit of edge and post topnotch results after a lot of hard work and specialized training. Now some advisors are trying to find ways to make the portfolios they manage work harder and smarter, in an environment where every fraction of a percentage point is more important than ever before. "Being tactical is the equivalent of being technically proficient as an athlete," Olsen says. "You need to be aware of everything that you can do, each move that is possible and what it takes to execute that."

Despite the springtime rally, there is still a chance that over the coming decade financial markets may be less generous to investors than in the past. Olsen believes that being prepared for the future to look more like the 1970s and 1980s is prudent. "In that kind of environment, what really counts is an advisor's or manager's ability to tease out extra performance where performance, overall, isn't very forthcoming."

As advisors know all too well, today many clients have less tolerance for risk than they did a year or two ago. At the same time, the losses that caused that risk aversion mean that every bit of performance an advisor can capture is more crucial to their ability to achieve their clients' long-term financial objectives. No ethical advisor will push a client to take more risk than is appropriate, so the battle to earn additional returns and recoup some of those losses comes down to savvy investment tactics.

Some of that is about taking advantage of the mistakes of others—such as those investors who were forced to sell in order to meet margin calls or fund redemptions at the height of the market panic, and ended up selling their best assets at a discount. To others, running an athletic portfolio means looking at new strategies and products, sometimes esoteric ones that may range from private equity fund partnerships sold on the secondary market (for the wealthiest investors) to the new breed of leveraged exchange-traded funds. (While these are available to even the smallest retail investors, Olsen and others point out that leveraged ETFs may not always deliver exactly the kinds of returns investors expect because of the way the leverage alters the relationship between the index and the investment; Massachusetts regulators are also probing the products.)

POSTMODERN PORTFOLIO THEORY

"The kind of investment strategy that works in a bull market-just diversify the portfolio and then be complacent when it generates returns-isn't a good approach to today's more bearish economic environment, and the volatile and unpredictable financial markets," argues Kirk Chisolm, a wealth manager with NUA Advisors in Portland, Maine, who oversees about $20 million in assets. "The rules today are different; buying-and-holding for the long-term is now what looks risky. Instead, you have to be creative and thoughtful, and look for ways on the margin that you can get the portfolios to generate even a bit of extra return. And then you need to protect every bit of what your clients earn."

The events of 2008 left many financial planners and advisors-Chisolm among them-with less patience for long-term, relatively inflexible strategies such as buying-and-holding throughout market dips and boom periods alike. That, they argue, is akin to an athlete just focusing on strength training, to the exclusion of speed or flexibility.

Diversifying among value and growth investments is just one lynchpin of modern portfolio theory that some advisors and investors now look at with enhanced skepticism. Michael Breen, senior analyst at Morningstar in Chicago, can understand why. "I have never before seen the same degree of overlap between large-cap growth and value funds," Breen says. Veteran value managers snap up growth stocks like Apple, while both growth and value managers buy energy stocks.