As anyone who has read Blueprint insights over the last few years knows, we believe in two types of diversification. First, asset diversification is a keystone of investing and we embrace the benefits. Second, we add time diversification using trend following techniques to mitigate the vagaries and cycles of markets. Why? Because, historically, when given enough time (say 20 years), asset diversification (buy and hold) has been almost unbeatable. However, humans do not naturally invest or even think that long term and struggle with staying the course when the market inevitably course corrects either in a short-lived correction or sustained drawdown. This in turn reduces the probability of achieving their long-term financial objectives. Please allow me to elaborate.
Topics: Systematic Investing
The active vs. passive debate reached a fever pitch on Monday when Jeff Gundlach referred to passive investing as a ‘mania.’ As expected, Vanguard quickly defended passive index funds by saying that “the data simply does not support his claims.” There is certainly nothing new about this debate. It’s been escalating since the first index funds were launched in the mid-70’s. However, moments like this remind the Blueprint team why we utilize passive index funds in the first place –they are the tools we use to build portfolios on behalf of our clients.
The movie “Moneyball” has an interesting scene in which General Manager Billy Beane is debating his scouts on how to best replace two key players lost in free agency given the team’s limited budget. The scene contains a back and forth between Beane and several scouts discussing and clearly disagreeing about “the problem.”
“You’re not even looking at the problem”, Beane declares.
We at Blueprint are excited to share with our readers and friends a fantastic interview with Jon Robinson and Tommy Mayes by Forbes contributor Peter Hans. In it, Jon, Tommy, and Peter discuss systematic investing, emotional intelligence, liquid alternatives, and more. Blueprint's story and background is also explored, providing valuable insight into how and why we do what we do. We are immensely grateful for the opportunity to have this discussion with Peter, and hope that you enjoy reading it as much as we enjoyed telling it.
At Blueprint, we utilize tactics based on the fundamentals of Trend Following, attempting to smooth the investment ride and to keep compounding high for our advisor clients. We generally do this using passive instruments such as index-based ETFs and Mutual Funds for two reasons: