The myth of 100% Invested
One of my aims for the Fusion Portfolio was to dispel or at least shake the certainty of belief many individuals have in always being 100% invested. Somehow people made a link between not being able to time the markets and being 100% invested when there is no link. I find it as crazy as suggesting beta is a good measure of risk.
The following chart shows the percent invested for the Fusion Portfolio compared to the ASX200 Index. As the index has moved from overvalued to undervalued the fund has invested more. Resisting the temptation to be 100% invested is difficult, but certainly a worthwhile and by no means impossible endeavour.
The chart is not perfect, but close enough. It does not account for the the Fx rate, the sold SPY position or the leverage used in the ULPIX position.
Klarman discusses the folly of 100% invested, we agree on that. Yet unlike him I see 100% does work for some people. If you have a continuous stream of new funds which are comparably high to alredy invested funds then being fully invested is a valid path.
I also disagree with Klarman when he raises absolute performane above all others which he views with contempt. I view both absolute and relative performance useful tools. I wish to perform well on both scores over time, though have little interest in either over short periods of time. Unfortunately the fusion portfolio only has a short period of time to report on. Fortunately it is a good relative performance and I have had funds available to take advantage of current undervaluations. Having funds available to take advantage of opportunities is what counts.
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