Slow and Steady

If I offered you an investment that gained a 20th of a percentage (0.05%) on your investment every business day of the year, would you take it? What if I offered you a strategy with a 13.93% CAGR? Is that a more enticing offer?

Now, what if I offered you a strategy that gained a tenth of a percentage (0.1%) on your investment every business day of the year? Would you prefer that to a strategy with a 29.80% CAGR?

As you may realise, each of those two pairs expresses the same growth rate over different time periods, but many people would not be satisfied with the offer of a mere 0.1% gain at the end of each day. Many investors, myself included, tend to get more excited about a single exceptional day compared to many smaller gains over a longer period of time.

Of course, there is more than one path to the end goal of financial gains, and you only need to average 0.1% daily to achieve the aforementioned 29.80%, but it is worth considering what is necessary on a smaller scale to meet those goals.

Many newer investors will attempt to come up with rules to hone in on and catch significant or exceptional movements, but in the process leave behind all the smaller gains that make up the foundation of a successful strategy. While it might be nice to say, “I bought stock XYZ the day before it jumped 50%,” that hardly matters if you lost every other day of the month. Beginner’s also tend to jump between strategies every few months, chasing strategies that may have stumbled on a brief period of exceptional performance.

Strategies such as our US and ASX All Weather look to focus in on those small incremental gains over a longer timespan by diversifying amongst a mix of defensive and growth assets. These strategies are available through our Membership Portfolios or our soon to come Harbourside All-Weather Programs.