I have been in the investing world, in many different roles, for two decades. There has never been a single bloody year where people around me coming Christmas said “Next year will be easy, I know what to expect”.
As every weekend, I am reading BankerOnWheels link-fest and I stumbled on this post by Wellington titled “a guide to investing in the age of anxiety”. Dude, just call it a guide to investing because anxiety ain’t new. And if I have to provide you with a prediction for 2026, it won’t be gone by then either.
Think about 2024: a lot of things went right. The S&P500 is up more than 20% for the second year in a row. Bitcoin is mooning again. House prices are as high as ever. How can you not be happy and relaxed?
Well, the bond market never recovered from 2022: every time it tried to rally, it got pushed down again. Non-US stocks are not exactly in the same place as their American peers. And if you do not own a house, you are not as stoked about the real estate market.
Anxiety is not asset allocation-dependent. Barred the degens, who might be anxious for other reasons, even if your portfolio was 100% SPY you have plenty to worry about, for one valuations. Will 2025 be the year when the party stops? If valuation means reverts, we are staring a long way down.
This is why I find it silly reading that someone is “unusually” anxious. The particular reason for worry might change from year to year, but I bet you always find one.
Fact is, if you built a well-diversified portfolio, you should not be worried. But you are; and if you are not, a post like the one I linked makes you wonder why I am not? should I?
Welcome to marketing my friend. Wellington, like any other intelligent asset manager, has to write these articles. Because they increase the conviction that you need a professional to look after your money and they demonstrate that this particular pro is at the top of their game. They reassure you by making you worried. Like a politician, they are the solution to the problem they are putting in front of you.
Market behaviour driven by new or unusual phenomena.
That specific phenomenon might be new but there is nothing new in markets being driven by the phenomenon du jour, being war, politics, or climate, you name it. If you can read and act on that specific input great, you will do well. If you can position your portfolio correctly when NVDA or MSTR would turn, or ride them if they won’t, you will be rich. But can you? And those skills that allowed you to read NVDA correctly, would serve you in the next cycle? Other than understanding that you will be blind-sighted constantly, I am not sure what’s the lesson to learn here.
Much ado about nothing
Aside from the typical “look for a guy who’s great at market timing” (good luck with that), the author actually agrees with me: carry on as usual. No shit, Adam. Back in my days as an asset allocator, I received countless decks that included rotational active strategies/active risk controls but, curiously, no real proof of that was included.
So much that now I dismiss it in advance.
Weeks ago I was listening to Rick Rieder on TCAF. Sure Rick, bond indexes are stupid but can you beat them? Turns out, so far Rick is right:
Where Portfolio 2 is a combination of CASHX and AGG to match Rick’s portfolio:
One year and a half is a pretty short track record but we should give Rick what Rick is due. Will it persist in the future?
What about the anxiety of having allocated to a once-overperforming fund that is not anymore? 🙂 The gnarling questioning if the good times would come back again. Mid-year I ditched the $CTA ETF and sure enough, it is by far the best trend following ETF of 2024…
Quoque tu, diversification
Mentioning diversification as a source of anxiety is tautological. I think Adam wrote it to offer his shoulder to the struggling asset allocator, vexed by a naive Board questioning their choices of not going with the simple solution of buying the S&P500 and chill. Maybe the asset allocator would reciprocate by handing some funds to Wellington? (believe me or not, I was writing this post while I was reading Adam’s one…and he closed his as I was forecasting. If only I were able to read markets as I can with sales dudes).
The part on Private Equity distributions reminded me of Ray Dalio and China: it is hard to be objective when you do not want to upset the hand that feeds you.
Risk Premia
Anxiety is a feature, not a bug. If the opportunity were that obvious, it wouldn’t be there. I have respect for the crypto bros who stick with it throughout all the valleys; I mean, you cannot HODL forever, otherwise what’s the point? But so far it is hard to negate they have been…right-ish.
More so, the lads who spent the time working on products, infrastructure and trading strategies. I have the conviction that the asset should be approached with a trend following plan; yet, I managed to do only some mean-reversion trading (taking out profits to leave just house money at risk). It is not easy.
Unless you do not see the risk at all. In that case, you will get punished, you just do not know it yet.
Adam’s tips on how to deal with anxiety are 100% spot on. Despite all the bad in social media, they offer a unique opportunity to anyone to be part of a community (provided you curate it well) of like-minded individuals who can both challenge and reassure you. That’s why I have this blog. That’s why I started a subreddit.
Investing is a lonely endeavour. In part, we want so because each one of us is trying to optimise for our own circumstances and preferences. But it doesn’t have to be.
What I am reading now:
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