In bull markets, it’s challenging to find high-quality stocks that are trading below their true values.

Yet, searching for gems and monitoring their performances is key to effective portfolio management, says Phil Davidson, CIO of U.S. Value Equity at American Century Investments. He’s co-manages the Renaissance U.S. Equity Income Fund.

Read: Search for hidden investment gems

Through active management, he adds, you can provide a “smooth ride for [your] clients as they build wealth.” It’s best to deliver “competitive returns in rising markets and limit losses in market downturns, so you maximize returns per unit of risk taken.”

So long as people own a diversified portfolio of high-quality stocks across major sectors,” says Davidson, they may be able to enjoy “above-average yields and lower volatility” over the long term.


The only challenge, he finds, is you need to regularly show clients how you’re reducing risks and volatility. Davidson suggests you explain your approach and demonstrate that you’re “as concerned about limiting downside risk as [you are about] providing opportunities [over the] long term.”

For investment tips, read:

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Why to be bullish on financials

Time to overweight stocks

Looking for low volatility

Prepare clients for interest rate hikes

Why to invest in U.S. real estate

Think big with small stocks

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