As the investment landscape changes, the only mode of survival is adaptation, or in the investment world, strategic change. Staying out of index funds is a necessary step toward gaining returns, according to the National Post.
Bill Gross, managing director of Pimco, says that moving away from index funds may create anxiety for investors, as it is hard to step away from something familiar. Gross points out that "avoiding the tyranny of an index can in effect produce a higher return with less risk."
"Successful money management has always depended on riding the wave of the crowd until it crests and crashes to the ocean floor," Gross said. "If you're going to hell, you might as well get paid for it, and bond investors for the most part are not being paid today. The restrictiveness of plan sponsor index guidelines should perhaps give way to a more flexible focus on divergent strategies that break the tyranny of adhering to the index mean."
Gross also mentioned that the increase in interest rates is the reason investors should make the change.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.