Amid the market turmoil, two traditionally safe S&P 500 sectors have survived the sharp sell-off this year — utilities and telecom. However, one fund manager says that investors who are betting on broad sectors to generate returns will be proved wrong within the year.
Jack Rivkin, chief executive of fund manager Altegris, said investors are too focused on sector performance as a whole. As market growth slows, he argues that the best approach for investors is to find an active manager to pick individual stocks.
"I think we're moving into a very different environment than we've seen over the last 10 years," Rivkin said Wednesday on CNBC's "Trading Nation." "We are not able to just buy bonds and stocks. I think you're going to have to get much more selective."
As the S&P 500 has fallen more than 10 percent year to date, investors have flooded into gold, bonds and sectors that generally do well in tumultuous markets. The utilities sector and telecom sector have risen 6 percent and 5 percent this year, respectively. But Rivkin recommends that investors avoid making sector-wide bets even on these safe-haven sectors.
Rivkin, whose fund invests in other actively managed funds, said he expects this dour market environment to persist for at least five years. "It leads you back to finding those active managers who know companies stock by stock," he said Wednesday.
But the ability to pick winning stocks can come with a high price tag. Since the Altegris Equity Long/Short Fund allocates money to other funds, investors end up paying fees twice — once for the Altegris fund, and a second time for the funds the fund invests in. Morningstar rates the fund's fees "above average."
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