A lot of investors stayed sidelined this year after the 2022 bear market crushed any confidence in the market they had left. After all, the pundits told them, a recession was imminent and exposure to stocks could only add to the pain. But sometimes a defensive posture is the surest way to fail.

Start with the bond market. If you bought 1-year Treasury paper a year ago, it’s maturing now. You’ll get your money back, plus 4.65% interest. There was no risk there.

However, the money you’re getting back is worth 3.1% less than it was at the end of 2022, thanks to inflation. The interest payments don’t stretch as far either. All in all, for every $100 you put in, you’re getting the equivalent of $101.40 back.

And in the meantime, everyone else was passing you like you were standing still. The S&P 500 gained 22% in that same 12-month period. The NASDAQ jumped a staggering 48%.

Adjust for inflation all you want, but those investors are still significantly richer than they were when you parked that $100 in the bond market where it wasn’t vulnerable to much besides opportunity costs.

Stock investors gritted their teeth, closed their eyes and jumped. They were rewarded for that calculated risk, that leap of faith.

And not every bond investor was foresighted enough to buy the actual bonds and hold to maturity. Long-term bond funds are down a net 6-7% in the trailing 12 months. Yes, it is possible to lose money in the Treasury market when other people are buying high and selling low on your behalf.

Likewise, investors who wanted to stay in the stock market but clung to the “defensive” sectors missed their shot at the dramatic recovery. In effect, those who were in aggressive areas of the market during the bear cycle locked in their losses while locking out the rebound that followed.

Utilities are down 9% over the past year. They lost money. Cash is flowing into areas of the economy that are more vibrant and have the power to rally when the bulls are in charge.

Healthcare is down. Defensive consumer stocks (think Big Food and grocery stores) are down. Energy is down a bit.

Those are clear losers. They rarely do well in an economic downturn. It’s just that they rarely drop hard . . . they preserve more value than other stocks when the market as a whole takes a dive.

In other words, they’re rarely a way to make real money unless you can leverage them with options like I do sometimes. What these sectors are all about is protecting existing capital.

If you already have more capital than you need, a strong defense is a decent way to hold onto more of it for a longer period. But most of us want to build wealth. We want more than we have.

That means a strong offense. Think technology, communications, discretionary consumer stocks. Industrials. These companies have what it takes to grow. Sometimes that proposition falters, but over time, they run farther to the upside than the downswings can take away.

Look at the industrials. Say you bought the sector on the brink of the COVID crash. You made about 25% in the years that followed until the 2022 bear market got in the way.

At the very worst moment of the bear cycle, your initial investment showed a slight loss. Maybe 1% if you squint at it hard enough.

And today, about a year from that bear bottom, your initial investment has recovered all lost ground and more. You’re up 35% across the cycle.

That’s a strong offense. The gains are bigger than the losses. You end up ahead. Cycle after cycle, you get farther ahead.

How about utilities? Down a net 9% across the same time period.

How about a bond fund? Down 20% counting dividends. Ouch.

The defense was lethal. Gold did well . . . but gold is a hedge against inflation. And a lot of people were desperate for an inflationary shield in the last few years.

I would have rather been in gold than bonds. But then again, I was happy to stay in stocks. To each their own. Just know what you’re getting into when you slip into one posture or another.