Chasing Performance…
When the market is rolling-hot, and everything is all sunshine and butterflies, it can be tempting to invest in the recent best-performing investments being ranted about by the talking heads plastering our TV screens. Unfortunately, research demonstrates investing in recent top-performing assets often leads to less-than-stellar results.
Check out the chart below, which illustrates the difference between sticking with a disciplined investment strategy versus chasing the most recent best-performing investments.
Chasing Winners = Blah Results
Source: Bloomberg, Redwood. Data as of 5/3/2024. Date Range from 12/31/2004 – 4/30/2024.Cash is represented by the FTSE 3-Month T-bill Index, Bonds are represented by the Bloomberg U.S. Aggregate Bond Index, Global Bonds are represented by the Bloomberg Global Aggregate Index, Large Cap Value are represented by the Russell 1000 Value Index, Large Cap Growth is represented by the Russell 1000 Growth Index, Commodities are represented by the Bloomberg Commodity Index, International is represented by the MSCI EAFE Index, Small/Mid-Cap is represented by the Russell 2500 Index, and REITs are represented by the FTSE NAREIT All REITs Total Return Index. The Diversified Portfolio (Overweight Winners) ranks each asset class based on the previous calendar year performance and weighs them based on a fixed scale with the highest allocation going to the best performing asset class and the lowest allocation going to the worst performing.
To help mitigate risk, a sound investment process’ such as our approach that works to limit portfolio drawdowns can help investors navigate through volatile markets.
- Our strategies are built through continuous, innovative, quantitative research.
- We believe long-term investment success stems from the preservation of capital.
- Our mandates include tactical strategies that seek to help limit a portfolio’s drawdown.
As always, please reach out with questions, concerns, or if you’d just like to chat! You can always reach us directly at 518-877-6600 or via email at leo@nicoterawealth.com
Kindest regards,
-Leo & Austin
If you know someone who may need help with their retirement plan or investment portfolio or would just like a 2nd opinion, please introduce them to us and we’d be happy to help!
Disclosure: This piece is for informational purposes only and contains opinions that should not be construed as facts. Information provided herein from third parties is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Charts and graphs are for illustrative purposes only. Discussion of any specific strategy is not intended as a guarantee of profit or loss. Past performance is not a guarantee of future results. Objectives mentioned are not guaranteed to be achieved. All performance referenced is historical. All indices are unmanaged and may not be invested in directly. Tactical allocation may involve more frequent buying and selling of assets and will tend to generate higher transaction costs. Investors should consider the tax consequences of moving positions more frequently. All investing involves risk, including loss of principal.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member
FINRA/SIPC.