November 20, 2025 • 8 mins
“Hey Mike, what’s your favorite strategy or method for managing a portfolio?”
Discover the difference between active and passive management, while acknowledging the difference between trading stocks and funds.
Text your questions to 913-363-1234.
Request Your Wealth Analysis by going to www.retireontime.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to How to Retire On Time, a show that answers
your retirement questions. We'rehere to move past that
oversimplified advice you'veheard hundreds of times.
Instead, we're we're gonna getinto the nitty gritty here. Have
some fun. As always, text yourquestions to (913) 363-1234, and
remember, this is just a show,not financial advice.
David, what do we got today?
David (00:24):
Hey, Mike. What's your favorite strategy or method for
managing a portfolio?
Mike (00:30):
So I was raised in the idea that advisers have to be
smart or smarter than themarket. I was raised in the
industry that we had to havefancy models and systems to
always outperform the market,and always blah blah blah.
Can you see a bit of a slantthere?
David (00:49):
Is that even possible to always People do it.
Mike (00:53):
Oh, yeah. It's very rare, and the reality is those models
that continue to outperform themarket year over year, it's a
closed end fund. They're nottaking new investors. They don't
want more money. They don'twanna delude what makes it work.
Oh. So here's my sobering decadeof research boiled down to a
(01:15):
three minute sound bite.
David (01:16):
Alright.
Mike (01:18):
I personally believe that no one should do one strategy,
but you should diversify yourassets by strategies, not
investments. So they saydiversify your assets. You buy
the S and P. You buy the Nasdaq.You buy the Russell.
You buy the Dow Jones. You buythe total market, and through
diversification, you've deriskedyourself. So you might have less
(01:40):
growth potential, but you've gotless downside risk. And maybe
you add some bond funds in therefor continued diversification.
But that's not reallydiversifying strategy.
That's one strategy with a bunchof different types of
investments, and that's thetraditional thought. The reality
is there's kind of a spectrumhere. So when you think of how
(02:01):
to manage your money, you've gotactive management, and you've
got passive management. Which isbetter? Who's to say?
Some years, active managementkills it. Other years, passive
management was the better optionbecause you've got whipsaw.
Whipsaw is when the market'strending one way and then turn.
So they're going down andimmediately pop back up, or
they're going up and they justfall off a cliff. That's tough
(02:22):
for active managers.
Great for passive managers whocan just ride through those
sharp turns.
David (02:28):
And active managers are constantly
Mike (02:29):
Constantly trading. If I were to define it, trading is
short term time horizons. So alot of churn, not churn in like
the negative sense of like, oh,we're just trying to create fees
or whatever. It's just there'sactive movement in the trading.
And then you've got passive,which is you buy, and then let
it sit for long term.
That's investing. Yeah. K? Soyou've got active and passive,
(02:51):
and who's to say which isbetter? And then you've got
narrow.
So narrow is think stocks. Sovery focused. And then you've
got broad, think funds, ETFs,indexes. Okay? So after a lot of
research and having been broughtup in active management with
very laser focused purchasing,I've seen it work really, really
(03:15):
well.
I know firsthand activemanagement can work really well,
but it doesn't always. And sothat's where this idea of
diversify by strategy reallycame to fruition. And here's my
opinion. You've got passive andbroad. Those are index funds.
I am in harmony with the ideathat most people should probably
(03:35):
have a buy and hold strategy ofbuying an index or two. S and P
500, the Russell two thousand,whatever is right for you, but
buying a couple of index fundsand just having a nice base of
buy and hold to ride through theunexpected volatility or the
sharp turns that you just can'tpredict. If one person can post
(03:57):
on whatever social mediaplatform and it shifts the
markets in an instant, that'stough to predict.
David (04:03):
Right.
Mike (04:04):
So Biden holding an index to me makes sense as a part of
the portfolio.
David (04:08):
Okay. Yes.
Mike (04:09):
Then the other part on the passive side is to overweight
your portfolio with good qualitycompanies. Do you think all 500
companies in the S and P 500 arewinners? Just absolute killing
it.
David (04:23):
I think we would be astonished to know how many of
those 500 are actually sort
Mike (04:27):
of Less than half. Less than half are really good. And
then you've got the Russell2,000. You think 2,000 are
really just killing it? I mean,just knockout returns.
No.
David (04:38):
So
Mike (04:39):
if you understand fundamental analysis and buying
good high quality companies,high quality can be defined in a
couple of different ways, butyou overweight your indexes with
a couple of companies that arereally good, you've got yourself
a competitive advantage. Nownotice the more focused
concentration on thosecompanies. You've increased your
risk by traditional definitions,but at the same time, you've got
(05:04):
more growth potential. So ifyou're wise about it, if you've
done the due diligence, that's areally interesting way to take
indexes, overweight it tosomething I mean, do your own
research at home. Take the S andP 500, and then just add a
boring good tech company likeApple or Microsoft or whoever.
(05:26):
Yeah. Put Amazon in there. Idon't care. A company you've
heard about. Like, it's a bigpopular company that seems to do
well.
And just watch if you put 20% inthat one company, and then
you've got your diversifiedindex, and compare the returns.
Now past performance is notindicative of future returns,
but it makes a very interestingcase study to consider. Now
(05:48):
should you hold those forever?No. You'll be mindful and make
adjustments along the way.
Even Warren Buffett will trade.But that's the kind of the
foundation. And then on theactive side, I think momentum
makes sense. So momentum, Idefine as you've got funds that
are sector or industry specific.So you can go into AI or
(06:10):
electricity or utilities orconsumer staples, but you're
overweight to where the money isbeing made.
Bond funds, if markets arecrashing, bond funds are taken
off, maybe you buy a bond fundETF, whatever it is. But you're
overweighting on a broadstandpoint as opposed to
individual stocks. And then thelast quadrant here is called
absolute return. Absolute returndoesn't mean guaranteed return.
(06:33):
It means it's reference toabsolute return theory.
Absolute return theory suggeststhat we don't care what the
markets are doing. What's thebest place to put my money now
for a shorter term period oftime? So typically, that's
buying a stock for a two week totwo month period of time with
the intention of selling it oncethe breakout finishes.
David (06:52):
Okay. So absolute return is almost always very short term
holding and
Mike (06:56):
move up. That has the highest risk, but the highest
growth potential.
David (07:00):
Uh-huh.
Mike (07:00):
The index funds buy and hold as lower risk compared to
the other options, but lowergrowth potential. And so if you
diversify by strategies, andit's very deliberate, I think
that's a more compelling way tomanage a portfolio as opposed to
saying, well, I'm a dividendsonly investor. Well, works in
some years, not so much in otheryears, or I'm a buy and hold
kind of person. Well, that worksin some years, but not so much
(07:22):
in other years. That's all thetime we've got for the show
today.
If you enjoyed the show,consider subscribing to it
wherever you get your podcasts.Just search for how to retire on
time. Discover if your portfoliois built to weather flat market
cycles or if you're missing taxminimization opportunities that
you may not even know exist.Explore strategies that may be
(07:43):
able to help you lower youroverall risk while potentially
increasing your overall growthand lifestyle flexibility. This
is not your ordinary financialanalysis.
Learn more about Your WealthAnalysis and what it could do
for you regardless of your age,asset, or target retirement
date, go towww.yourwealthanalysis.com today
(08:03):
to learn more and get started.
Welcome to How to Retire On Time, a show that answers
your retirement questions. We'rehere to move past that
oversimplified advice you'veheard hundreds of times.
Instead, we're we're gonna getinto the nitty gritty here. Have
some fun. As always, text yourquestions to (913) 363-1234, and
remember, this is just a show,not financial advice.
David, what do we got today?
David (00:24):
Hey, Mike. What's your favorite strategy or method for
managing a portfolio?
Mike (00:30):
So I was raised in the idea that advisers have to be
smart or smarter than themarket. I was raised in the
industry that we had to havefancy models and systems to
always outperform the market,and always blah blah blah.
Can you see a bit of a slantthere?
David (00:49):
Is that even possible to always People do it.
Mike (00:53):
Oh, yeah. It's very rare, and the reality is those models
that continue to outperform themarket year over year, it's a
closed end fund. They're nottaking new investors. They don't
want more money. They don'twanna delude what makes it work.
Oh. So here's my sobering decadeof research boiled down to a
(01:15):
three minute sound bite.
David (01:16):
Alright.
Mike (01:18):
I personally believe that no one should do one strategy,
but you should diversify yourassets by strategies, not
investments. So they saydiversify your assets. You buy
the S and P. You buy the Nasdaq.You buy the Russell.
You buy the Dow Jones. You buythe total market, and through
diversification, you've deriskedyourself. So you might have less
(01:40):
growth potential, but you've gotless downside risk. And maybe
you add some bond funds in therefor continued diversification.
But that's not reallydiversifying strategy.
That's one strategy with a bunchof different types of
investments, and that's thetraditional thought. The reality
is there's kind of a spectrumhere. So when you think of how
(02:01):
to manage your money, you've gotactive management, and you've
got passive management. Which isbetter? Who's to say?
Some years, active managementkills it. Other years, passive
management was the better optionbecause you've got whipsaw.
Whipsaw is when the market'strending one way and then turn.
So they're going down andimmediately pop back up, or
they're going up and they justfall off a cliff. That's tough
(02:22):
for active managers.
Great for passive managers whocan just ride through those
sharp turns.
David (02:28):
And active managers are constantly
Mike (02:29):
Constantly trading. If I were to define it, trading is
short term time horizons. So alot of churn, not churn in like
the negative sense of like, oh,we're just trying to create fees
or whatever. It's just there'sactive movement in the trading.
And then you've got passive,which is you buy, and then let
it sit for long term.
That's investing. Yeah. K? Soyou've got active and passive,
(02:51):
and who's to say which isbetter? And then you've got
narrow.
So narrow is think stocks. Sovery focused. And then you've
got broad, think funds, ETFs,indexes. Okay? So after a lot of
research and having been broughtup in active management with
very laser focused purchasing,I've seen it work really, really
(03:15):
well.
I know firsthand activemanagement can work really well,
but it doesn't always. And sothat's where this idea of
diversify by strategy reallycame to fruition. And here's my
opinion. You've got passive andbroad. Those are index funds.
I am in harmony with the ideathat most people should probably
(03:35):
have a buy and hold strategy ofbuying an index or two. S and P
500, the Russell two thousand,whatever is right for you, but
buying a couple of index fundsand just having a nice base of
buy and hold to ride through theunexpected volatility or the
sharp turns that you just can'tpredict. If one person can post
(03:57):
on whatever social mediaplatform and it shifts the
markets in an instant, that'stough to predict.
David (04:03):
Right.
Mike (04:04):
So Biden holding an index to me makes sense as a part of
the portfolio.
David (04:08):
Okay. Yes.
Mike (04:09):
Then the other part on the passive side is to overweight
your portfolio with good qualitycompanies. Do you think all 500
companies in the S and P 500 arewinners? Just absolute killing
it.
David (04:23):
I think we would be astonished to know how many of
those 500 are actually sort
Mike (04:27):
of Less than half. Less than half are really good. And
then you've got the Russell2,000. You think 2,000 are
really just killing it? I mean,just knockout returns.
No.
David (04:38):
So
Mike (04:39):
if you understand fundamental analysis and buying
good high quality companies,high quality can be defined in a
couple of different ways, butyou overweight your indexes with
a couple of companies that arereally good, you've got yourself
a competitive advantage. Nownotice the more focused
concentration on thosecompanies. You've increased your
risk by traditional definitions,but at the same time, you've got
(05:04):
more growth potential. So ifyou're wise about it, if you've
done the due diligence, that's areally interesting way to take
indexes, overweight it tosomething I mean, do your own
research at home. Take the S andP 500, and then just add a
boring good tech company likeApple or Microsoft or whoever.
(05:26):
Yeah. Put Amazon in there. Idon't care. A company you've
heard about. Like, it's a bigpopular company that seems to do
well.
And just watch if you put 20% inthat one company, and then
you've got your diversifiedindex, and compare the returns.
Now past performance is notindicative of future returns,
but it makes a very interestingcase study to consider. Now
(05:48):
should you hold those forever?No. You'll be mindful and make
adjustments along the way.
Even Warren Buffett will trade.But that's the kind of the
foundation. And then on theactive side, I think momentum
makes sense. So momentum, Idefine as you've got funds that
are sector or industry specific.So you can go into AI or
(06:10):
electricity or utilities orconsumer staples, but you're
overweight to where the money isbeing made.
Bond funds, if markets arecrashing, bond funds are taken
off, maybe you buy a bond fundETF, whatever it is. But you're
overweighting on a broadstandpoint as opposed to
individual stocks. And then thelast quadrant here is called
absolute return. Absolute returndoesn't mean guaranteed return.
(06:33):
It means it's reference toabsolute return theory.
Absolute return theory suggeststhat we don't care what the
markets are doing. What's thebest place to put my money now
for a shorter term period oftime? So typically, that's
buying a stock for a two week totwo month period of time with
the intention of selling it oncethe breakout finishes.
David (06:52):
Okay. So absolute return is almost always very short term
holding and
Mike (06:56):
move up. That has the highest risk, but the highest
growth potential.
David (07:00):
Uh-huh.
Mike (07:00):
The index funds buy and hold as lower risk compared to
the other options, but lowergrowth potential. And so if you
diversify by strategies, andit's very deliberate, I think
that's a more compelling way tomanage a portfolio as opposed to
saying, well, I'm a dividendsonly investor. Well, works in
some years, not so much in otheryears, or I'm a buy and hold
kind of person. Well, that worksin some years, but not so much
(07:22):
in other years. That's all thetime we've got for the show
today.
If you enjoyed the show,consider subscribing to it
wherever you get your podcasts.Just search for how to retire on
time. Discover if your portfoliois built to weather flat market
cycles or if you're missing taxminimization opportunities that
you may not even know exist.Explore strategies that may be
(07:43):
able to help you lower youroverall risk while potentially
increasing your overall growthand lifestyle flexibility. This
is not your ordinary financialanalysis.
Learn more about Your WealthAnalysis and what it could do
for you regardless of your age,asset, or target retirement
date, go towww.yourwealthanalysis.com today
(08:03):
to learn more and get started.
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