There Is No Spoon

With all credit to

Everybody wants the same thing in the end, high relative returns with a minimum number of sleepless nights.  Human psychology being what it is, however, investors are often their own worst enemies in realizing their goals. Risk-averse investors, for instance, should want to underperform the benchmark in a bull market – it implies a strategy of risk management that will protect them when, inevitably, the benchmark heads lower. One of our favorite phrases was “no one’s managing risk in the index”. Of course the benchmark’s going to outperform in a sustained bull market.  What happens in practice, investors getting frustrated by trailing the index for a couple of years, and then switching their money into more aggressive pools right before a downturn, goes a long way in explaining why most people lose money.

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