Investing is Not Just About Numbers Play Your Strengths

Long-Term Records are Full of Ups and Downs

I did a simulation of how often a top money manager earning 20% per year with a 15% standard deviation would lose money over short time periods. A 20% return would be about double the market’s long-term average return and a 15% standard deviation would be lower than historic market volatility. So this is someone doing very well. But on any given day, this hypothetical manager would lose money almost half the time. He’d lose money in 35% of the months and, on average, one quarter per year. Once every ten years he’d have a losing year. I think it’s healthy for investors to remember that even great long-term records are full of plenty of down months and quarters. Remembering that is hard to do sometimes as time horizons in the industry have gotten so short.