Read the financial media and all you will hear about the best way to invest for your retirement is to buy ETFs and hold them. Well for the last nine months, investors have watched their savings plummet by more than 20% following that bit of advice. Even though we are still in the midst of the ETF growth explosion, it may be that with all the market volatility, active management of funds is the way to go.

According to a report in Bloomberg: " Hedge funds declined by an average 0.7 percent in June, bringing the year-to-date loss to 0.75 percent, data compiled by Hedge Fund Research Inc. shows. It's the worst start to a year since the Chicago-based firm began tracking returns in 1990."

Equity hedge funds lost about 3.3% during the first half of the year. That thoroughly crushes the S&P 500 which dropped 19% from the October peak. This actually mean that the hedge funds are doing what they are supposed to do and be a hedge against falling markets.

It will be interesting to see returns for the mutual fund industry. If actively managed mutual funds were on average able to seriously outperform the broader indices, then I think investors will start taking a real look at moving away from ETF investing and back into more traditional actively managed accounts.

How many buy and hold investors wish that they would have only lost 3.3% so far this year?

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/10/08.