This week, Richard Brennan joins us on the show to discuss how people can benefit from the effects of compounding while others end up a paying a price for it. We also cover some thoughts on ‘path dependency,' why those invested in stocks should diversify using Trend Following strategies, why stable returns can only be correctly judged over long time periods, how to analyse fund performance without being influenced by the effects of compounding, some thoughts on what is known as ‘geometric returns’, and we explain the term ‘ergodicity’.
In this episode, we discuss:
How to stay on the right side of the effects of compounding
How many strategies can be limited by the make-up of their previous versions
The profitable & negative correlation of Trend Following to equities when stocks are falling