We’re all seeking to outperform the market.
But outperformance comes and goes. We all know this. There are no hacks. There are no silver bullets — only processes that we can follow, and there isn’t a process that is perfectly suited for every market scenario.
So where does that leave us? Should advisors resign to accept disappointments from their strategist partners — after all, nobody is perfect right?
Of course not.
With so many investment options at your fingertips, advisors and investors don’t have to accept second-rate services from their partners. In fact, just the opposite. Knowing each strategy’s strengths and weaknesses, we should work to identify strategies that are best positioned to deliver an investment experience that will keep clients calm, comfortable, and confident throughout the market’s inevitable ups and downs.
2026 and other volatile market periods bring this idea into focus... When things get rocky, the investment experience delivered to clients becomes extremely important. Are your portfolios a source of confidence and clarity as the markets waver? Or are they creating more questions than answers?
Outperforming in an up market is great. Beating the benchmark when the market experiences a strong updraft will undoubtedly please your clients. But doing so might also entail accepting a higher risk profile that leaves the investment experience vulnerable to disappointment.
Take 2025 for example. The market returned just over 17%, with heavy concentration in the Magnificent 7 (accounting for more than 7% of the return). To outperform in that environment, you’d likely need to be ultra concentrated in a basket of historically overvalued stocks that are placing huge bets on an emerging technology. Don’t get us wrong… AI is undoubtedly going to change entire industries and is likely to be ingrained in nearly every facet of our future. But the winners and losers aren’t set in stone. And the profitability model is still being defined. That means we can expect plenty of volatility as things develop.
Outperforming in a hot market is good. But we all know that clients tend to scrutinize their portfolios less when the news is overwhelmingly positive. Using a hypothetical, if you can deliver 15% when the market returns 17%, that’s a good year. We’d wager that not many clients would balk at a 15% return — ample for 99% of long-term retirement goals.
But when markets are volatile, flat, or in a period of decline, the optics change entirely.
And that’s an opportunity. If you can track close on the market’s hot periods, but outperform when things get choppy, you gain the opportunity to become a pillar of stability and a source of reliability. This is when you earn lifelong trust.
How can you do it? The first and obvious answer is keep an eye on the risk profile of your portfolios. But that’s a given, and there are a lot of ways to get to the same risk figure on a proposal.
It’s important to dig one layer deeper to focus on strategist mix. What kind of strategists are you employing in your traditional three or four manager blend? What experience does each strategist’s discipline offer — and what percentage of the portfolio are you willing to allocate to that experience?
The takeaway here is focus on the experience in conjunction with performance figures.
Strategists come into and fall out of favor — some with greater variance than others. As you evaluate strategist performance, consider the experience and the story being told by those figures. Each manager follows a process. What environments is the process positioned to thrive in? If the process falls short, can you easily explain why to your clients? And above all, is the strategy something you and your clients are going to feel comfortable with as markets ebb and flow?
AAMA is a fundamental manager. We’ve tracked relatively well on the upside over the past few years, but we haven’t beat benchmarks as our fundamental process isn’t designed to follow ultra concentrated markets. In 2026, we’ve handily outperformed as valuations trend back down toward the mean as questions arise around inflation, geopolitical tensions, and the profitability model of AI.
Performance should support the experience. So what experience are you seeking?
If it is confidence and consistency, maybe look at a fundamental core for your portfolios (blended with a solid tactical manager and downside diversifier, of course).