By Howards Mark
The Most Important Thing
The key to this matrix is the symmetry or asymmetry of the performance. Investors who lack skill simply earn the return of the market and the indicates of their style. Without skill, aggressive investors move a lot in both directions, and defensive investors move little in either direction. These investors contribute nothing beyond their choice of style. Each does well when his or her style is in favour but poorly when it isn't.
On the other hand, performance of investors who add value is asymmetrical. The percentage of the market's gain they capture is higher than the percentage of loss they suffer. Aggressive investors with skill do well in the bull markets but don't give it back in the corresponding bear markets, while defensive investors with skill lose relatively little in bear markets but participate reasonably in bull markets.
Everything in investing is a two-edged sword and operates symmeterically, with the exception of superior skill. Only skill can be counted on to add more in propitious environments than it costs in hostile ones. This is the investment asymmetry we seek. Superior skill is the prerequisite for it.
Uncle8888 has become Defensive Retail Investor with his revised investing strategies for the next 10-year goals???
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why does uncle cw keep singling me out as without skill.
ReplyDeletel do not think l am in any one of these categories.
ReplyDeleteCome to think of it, i only think am an active investor but actually not much different from passive investors who only buy STI ETF or equivalent. Why?
ReplyDeleteAnd i think i have been in all the matrices.
Whew! i thank God, i still survive.
Shalom.
Amen.
True. Probably in different phases over market cycles we are moving in and out in all matrices.
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