While the current stock market boom has some investors rejoicing, it doesn’t appear as though their level of anxiety has abated much of late. This being the case, it is little wonder that “absolute return” investing is currently getting so much attention. Most private investors’ number one priority is capital preservation and maintaining their spending power. Yet when constructing investment portfolios, we would argue disproportionate allocation is made towards relative return strategies vs. absolute return strategies. This obsession of focusing on relative returns is underpinned by a well-known behavioural bias called relative thinking, which is well documented by the work of psychologists such as Daniel Kahneman and Amos Tversky. By taking an absolute approach towards risk and return, we believe a portfolio outcome can be engineered that can protect investors’ against some of these behavioural biases and ultimately deliver the goal of capital preservation and growth irrespective of market conditions.
Speaker: Nick Selvaratnam, Co-Founder, Portfolio Manager, Dalton Street Capital
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