Investing strategies: in praise of boring

I’ll say the unfashionable thing out loud: I’d rather be reliably a little bit right than occasionally spectacularly right.

In a business that rewards the bold call and the star manager, that sounds like an admission of low ambition.

I think it’s the opposite.

Consistency compounds

The maths is unsentimental. Consistency can never be taken for granted, but a strategy that adds a small, steady edge and manages to keep it, year after year, without a blow-up, has the potential to compound into something serious. 

A strategy that shoots the lights out one year and hands it all back the next does not. The second kind gets the headlines. The first tends to make people richer.

Consistency isn’t the boring cousin of performance. Over a long enough horizon, it is the performance.

The myth of brilliance

Investment culture finds this hard to accept. Too often investors celebrate the manager who got one big call spectacularly right and mistake one successful outcome for repeatable skill.

It’s tempting to treat conviction as a virtue, but in my view, conviction with no discipline behind it is just expensive noise. The search for the next great idea can crowd out the quieter discipline of trusting good ideas already in place.

Be systematic, not dramatic

The alternative isn’t to keep chasing the next idea. It’s about looking to capture good ones systematically.

Decide in advance what genuinely drives returns (persistent, evidence-backed risk premia rather than this month’s story), then express those ideas broadly across the opportunity set instead of relying on getting the timing of a handful of companies exactly right.

Keep unintended risks small, so performance reflects the decisions you intended to make, rather than hidden sector, country, geopolitical or thematic risks that quietly creep into portfolios.

The stories we tell  

None of this makes for a good dinner-party story. What it can do is help avoid two things that quietly destroy long-term returns: the big mistake, and the big fee you paid for the privilege of making it.

This is really an argument about temperament. The hardest part of a consistency-first approach isn’t the modelling. It’s sitting still when others are having a spectacular year, and you’re being asked why you aren’t.

I’ve seen enough market cycles to know how those spectacular years often end. I’ll give up the bragging rights and keep the compounding.

The real edge is being consistently disciplined. Boring, done properly, is one of the most powerful ideas in investing, and I’m happy to be its advocate.

Ross Olusanya is quantitative investment director, quantitative investment solutions at Aberdeen.