Stockbrokers take the long view
Before 2008, "There was a growing sense of complacency in portfolio management and a consensus belief that low-cost indexing was the best way to outperform the market," says William Trapp, resident director for Merrill Lynch in Florence, Ala. But a year of negative 40 percent returns changed many minds in the investment industry.
"(And) more than the math, 2008 was also a crisis of confidence, and a lot of trust was lost in our system," he says.
Despite a strong recovery in stocks, Trapp says most individual investors remain cautious. "We see more basic value investing and stock picking in our daily work now," he says. "There are a lot of people now who are very comfortable holding individual equity investments in blue chip, dividend-paying, cash-generating, low-debt companies that are as profitable as they have ever been. They don't want to hear about the next great strategic alpha, long, short fund."
In his practice, Trapp says he spends more time talking with clients about their goals for their money, "rather than how it is performing relative to an index." Today, those goals and the time frame in which to reach them inform his investment recommendations more than the market.
"The obsession with performance will always be part of this business, but it's becoming a lower priority since the crisis," he says.