(Wo)man vs. the Market

Many of us look at investing as a David v. Goliath scenario: you are David, up against the giant. There’s a mountain of evidence that’s just waiting for you to wade through (and get lost in) that will prove this point. But – goes the so-called hope – if, by chance, you manage to find the vaunted slingshot (i.e., the winning strategy, the golden-ticket investment) then you can topple the giant.

Yet this idea of finding a perfect slingshot – systematically beating the market time and time again – is a myth. (Wo)man v. the market is anything but a fair fight. As gamblers will tell you, the house always wins, and in this case the “house” is market forces – which we should accept as being unbeatable and not put up a costly fight. Trying to beat the markets by speculating on which investment makes the perfect slingshot is no way to achieve real, sustainable investment success. There’s an abundance of literature (about four decades’ worth) compiled by devoted money managers (e.g. Michael Jensen), who have demonstrated that they can beat the market – beat the House – on a consistent risk-adjusted basis. This seemingly magical math seduces many investors into believing that a manager holds some wondrous treasure of a strategy, an investment Golden Fleece, that shows which money manager you should follow to the ends of the Earth. Yet speculating on a latest-and-greatest strategy is much like speculating on any one stock: it is still gambling, not investing for the long term. There is very little persistence in the performance of managers and hardly any tried and true method of gleaning whom will outperform the market in the future.

I’m sure you’ve seen that ubiquitous disclaimer, written in the 5.5 point New Times Roman font on each and every investment prospectus, disabusing you of any thought that the past predicts the future. I’ll paraphrase it for you – past performance is no guarantee of future results. Now that is a money-in-the-bank statement! Unfortunately, it won’t guarantee that you’ll be laughing all the way to the bank. It’s too bad that far too many so-called savvy DIY investors don’t heed that warning.

Investing in a well-diversified global portfolio with strategic allocations to stocks, bonds, and commodities paves a path to long-term investment success. These are exactly the kind of portfolios we create at LexION Capital. Our approach is timeless for a reason: we never gamble on a golden ticket or the latest so-called golden fleece. We construct well-diversified portfolios that allow our clients to benefit from the best possible investment opportunities all over the globe.