16 Oct 2018

A week in review, October 11th

Most of these commentaries were written before the recent market wobble. 


In the Ranger Fund, the portfolio insurance that we have in place (discussed below in “Portfolio Insurance”) provided some comfort, with our insurance positions returning 30% in aggregate. However, the volatility experienced was well within the excess range that we describe in the article, so whilst the positions provided a positive contribution over the week, the events were not in the “black swan category that we are aiming to insure against. Nevertheless, they performed according to expectations. 


Regarding what this wobble means going forward, you will probably have heard plenty of differing opinions by highly qualified experts.  We also have opinions, but they are, as are all of them, qualified best guesses.  What is most important to remember is that equity markets are highly volatile in the short-run, but you get paid for that in the long-run in the form of a higher compounded return than less volatile investments. While we agree that caution is required, being out of equities can be more detrimental to the creation of long-term wealth than being invested in them.  There are plenty of people who have sat on the side-lines for the last five years, convinced that a crash was imminent, who have missed out on a very significant return from equities, up to 100% if not more.  


We remain mindful of the downside risk as well as the risk of missing out on the upswing.  If we can be positioned appropriately for the downside episodesthey can create wonderful investment opportunities.  Mr Market has just put his stocks on sale and we can be first in the queue.