Cliff Asness on investment success

Investment success is about sticking to the plan.

Source: Cliff Asness on investment success – Business Insider

Long-term, being a successful investor comes down to taking a disciplined approach with the right amount of risk that will allow you to ride out the inevitable tough markets. It’s time in the market that matters, not timing the market.  

Most investors are not prescient enough to see every sell off or bear market, but by using an asset allocation approach that invests in assets that do well in times of growth (stocks), inflation (commodities), contractions (bonds), and the growth of other regions (emerging markets), the investor will be taking advantage of whatever is working in the current cycle and be set up to take advantage of the next part of the cycle.

Markets and economies experience cyclical moves from the flow of capital.  As one industry or country grows it attracts investment.  As it continues to grow, more and more capacity is added until eventually there is an overcapacity and the cycle begins to contract. (ex. the fracking industry currently)

An asset allocation strategy takes advantage of these cycles by exposing a portion of the investor’s portfolio to the asset class that is benefiting and being prepared to take advantage of the next leg in the cycle.

So make a plan and stick to it.  If you need help formulating an appropriate asset allocation, seek help from an advisor who can gauge your risk tolerance and help you stick to the plan in times of turbulent markets.


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