Additive To Your Long Term Result

Here's a quote from Jonathan Hoenig;

The best portfolios are designed to protect capital first while pursuing steady, absolute returns over time—not reacting to every market swing.

From Stephen Harvey of Sagard Wealth;

And Matthew Tuttle. 

You've been hearing for years about ETFs democratizing access to various strategies, including from me. I think the ETF industry has forced the mutual fund industry to also up its game. If you've been reading this site for a while then you already have at least a start at knowing how to do what all three quotes are talking about. 

The underlying premise connecting all three quotes is how to avoid making behavioral and allocational mistakes. One way to do this is to avoid obvious signs of excess. I've got some track record for this with banks in the build up to the Financial Crisis, bonds yielding nothing as Tuttle says and now with AI and AI-adjacent themes. 

There were enough non-bank financials 20 years ago (more now) that being slightly underweight the sector while avoiding banks almost entirely (held on to BNS which clients still have) wouldn't have been too disruptive if there'd never been a crisis. There were/are countless alternatives to bonds and bond funds with duration that would do what I think people want bond and bond funds to do, we've looked at this countless times. Completely avoiding tech today is impractical, it's too big a piece of the market to be zero weight. 

I think being underweight or avoiding excesses is easier than picking what will do best. Occasionally sidestepping an implosion, so not even every implosion, will be very additive to your long term result. 

The link quoting Harvey is from Chief Investment Officer and while I am unfamiliar with Harvey and his firm the context is institutional portfolios. The strategies and exposures he is talking about can be found with an abundance of choice from mutual funds now and to a lesser extent, ETFs. Quick note, pound for pound, ETFs are the better way to go but not everything goes best into the ETF wrapper.

Harsh closeout coming, too many people in the industry are still talking about and using very plain vanilla fixed income products that simply haven't been doing what investors would hope for and expect (repeating for emphasis). 

I've put up similar versions of this chart many times before, what do you want your equity offset, let's not called it fixed income, to look like. I think to avoiding duration will continue to be very additive to your long term result.

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