A survival guide to escape mauling in every bear market
It's tempting to pour money into funds that perform very strongly, but often, they're just the ones that took concentrated risks which paid off
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THREE weeks ago over dinner my 87-year-old father asked me how much money I had made for our clients in our equity strategy in 2017. There was a twinkle in his eye, and I knew exactly why he asked this. After my answer (+22 per cent from a partially hedged equity portfolio), he replied that he had gained over 80 per cent.
For years I had repeated my observation that to massively overweight emerging market equities, and to add on leverage in yen, was as inappropriate a portfolio as one could possibly have for any investor, especially a retired person with no other sources of income. To my father, this massive outperformance in 2017 was proof that he was right to ignore my past warnings.
In investing, more than any other endeavour, over the short term not only is it impossible to look at performance to differentiate between skill and luck, very strong performance is actually inversely correlated with skill (or if not skill, at least caution and a well-diversified portfolio).
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