In his latest article titled Why Not 100% Equities, Cliff Asness argues for pushing change and embracing some risk for potentially better returns, instead of settling for lower performance due to investor comfort. He says that holding onto lower-performing portfolios because investors might abandon them due to temporary dips is unacceptable. The current situation, where many won’t accept even slight underperformance, creates a self-fulfilling prophecy of avoiding riskier but potentially beneficial strategies.
Here’s an excerpt from the article:
We’ve found most can’t acknowledge that this rationale is the same as saying “this would improve an investor’s portfolio, but very occasionally it could make them look unconventionally bad relative to others, so they might give up on it.
Therefore investors should just stand pat with the less-effective portfolio.” Citing that many can’t do it is not a valid justification for not trying to change things for the better.
It is not our collective job to tell investors “keep doing what will likely earn you less for the same risk, as it’s just oh so comfortable for you.”
Rather, it’s our job to collectively convince, cajole, and clamor for what we believe is right, and then help investors stick to it.
Too often the observation that doing what’s right is hard becomes a self-fulfilling prophesy and an excuse to continue doing what’s wrong.
Well, one day, we will figure out how to “volatility launder” high-volatility alternatives by not marking them to market – then the problem will be solved.
You can read the entire article here:
Cliff Asness – Why Not 100% Equities
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