Every VIA IV portfolio is designed and diversified to minimize volatility and provide overall risk-adjusted returns superior to investment in any single asset class. Public equity markets are very efficient: they are unpredictable over the short term, but steadily increase in predictability over time. Risk and return are related. Thus broad global diversification, along with balanced asset allocation, determines the success of an investment model. Historical benchmarks show that: 1) structured asset class managed returns consistently exceed the results of “stock picking” over time; 2) small cap equities offer higher expected returns than large cap equities; and 3) “value” equities provide expected returns superior to growth stocks. Different asset classes perform differently at different times – exactly which classes, and when, cannot be predicted. Diversification therefore is essential. One must be invested at all times to participate fully in market returns.
Timing Doesn't Work
Picking “hot stocks,” by definition, does not offer uniform returns. In fact only 17% of those who follow this strategy beat the market after 10 years. Index-based investing, both commercial and private, has been empirically and repeatedly shown to provide consistently superior returns over time.
Trust Market Prices
Markets reflect the vast, complex network of information, expectations and human behavior. These forces drive prices to “equilibrium” value. Because everyone has access to the same information, it is difficult, if not impossible, to choose stocks that will outperform the market with any degree of consistency.
A Disciplined Approach
History shows that to build wealth, you must look beyond the concerns of today and invest long-term. The only way to fully benefit from market returns is to be fully invested 100% of the time. Those who are currently “killing it” by timing the market, “get killed” in the race that matters — the long run.