Wednesday, December 29, 2021

Any fool can make a fortune, brains needed to hold onto it


 

Any fool can make a fortune, it takes a man of brains to hold onto it after it is made - Cornelius Vanderbilt 

This quote is sticking with me as all the passive long beta investors laugh at the low performing hedge funds. I am not trying to be an apologist for hedge funds. They have gotten their flows and fees. However, there is the current investor belief that holding long beta portfolios indicates astute investment skill. It could be, but the more likely case is that inertia kept investors from further action. The fortunes of the lucky? 

The question for 2022 is whether investment inertia will still be a winning strategy. Following momentum and maintaining a core allocation is still a good strategy, yet the issue is whether this is the best way to hold onto pandemic wealth. After the March 2020 crisis, the shift to pandemic-sensitive firms and a return to normalcy were the key trade themes. 

Is the same pandemic/normalcy portfolio the best way to hold onto the pandemic equity bump? With higher inflation, less stimulus and a different pandemic risk, the portfolio of yesterday may not fit the circumstances of today.

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