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The Secret Sauce

asset allocation buffett cape financial education financial risk management indicators invest Feb 01, 2025

When it comes to investing many investors fail to understand that it is the process not trying to select the investment that delivers the return. 

That is why systematic investing works. The idea is selecting a group of ETFs for example, and just holding them on a permanent basis. The money is made by rebalancing and asset allocation - the process - rather than ttrying to work out which ETF is "hot" and will deliver outsized returns. 

We know most asset classes run hot and cold. Instead of trying to pick winners every year for the next 30 years, a much easier and more successful approach, which also delivers higher long term returns is to simply use rebalanicng and asset allocation. 

Many don't understand this as they get seduced by the idea that every 12 months they can select a winning group of ETFs. One year? Yes, maybe. But doing it for a 10 or 20 years period is near impossible. 

Again the process is what matters. Even stock traders who have a shorter timeframe, realise you can't perfectly select every winner.  Develop your process whether it is long term or short term and stick to it. 

That's the secret sauce. 

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