Many investors focus too much on average returns and neglect to look at the volatility of those returns, which is critical. Whilst most investments do move up and down to some degree, excessive volatility is not only difficult to cope with psychologically, it can also dramatically reduce long term performance.
For example, let’s assume we had the choice between investments in two different Australian managed funds that both had an average return of 8% per year, as per the table below:
Both of these managed funds have an “average” return of 8%. But after five years, Portfolio A is worth $146,933 … and yet Portfolio B is only worth $130,000. That’s a difference of $16,933. And it’s just the tip of the iceberg. In 30 years, Portfolio B will only be worth $483,038. Meanwhile, Portfolio A, with its ‘steady, consistent returns’ will have grown to $1,006,266 – more than twice as much!
The Rushton Global Market Neutral Fund is an Australian managed fund that has a strong focus on capital preservation, and manages volatility in a number of ways, including:
- Largely removes share market risk by being market neutral;
- Largely removes currency risk by being currency neutral;
- Reduces the impact of a poorly performing share by being highly diversified over 300+ positions;
- Reduces the impact of any particular country, by being diversified across many countries;
- Reducing the risk of leveraging by maintaining prudent levels of exposure; and
- Carefully manages exposure to macro-economic factors such as interest rates and, oil prices, and controls individual sector exposure.
For more information about the Rushton Global Market Neutral Fund, click here.