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The Power of Less Downside: The 80:60 Case Study

The power of compounding is profound and well understood. What is less understood is the power of managing your downside. Too often we focus on the upside potential without due attention to the downside characteristics of investments. In this white paper we examine the power of reducing the downside even when the upside may also be limited. Specifically we focus on a strategy we call 80:60, a strategy that only participates in 80% of an up month’s return and only 60% of a down month’s return. Losing less to win doesn’t sound very exciting but as we will show it can be very powerful.  It has many similarities with a sporting team that has a great defence or back line. Preventing the opposing team scoring can increase your chances of winning.