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Ep. 1286: Mike Dever Interview with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
Reduce Loss to Increase Gains
Performance gains can sometimes inflate ego and lead individuals to overlook the foundational support networks that have contributed to their success over time. It’s essential to recognize the collaborative spirit within competitive environments, where mutual success is valued. When discussing investment strategies, the principle of reducing losses to enhance returns becomes paramount. By managing downside risk effectively, such that losses are minimized, investors can recover from a higher starting point, thus increasing their return slope over time. This approach emphasizes that surviving drawdowns, even during challenging market conditions, is crucial for long-term success. Additionally, it's important to acknowledge the psychological and mathematical realities of drawdowns; for instance, recovering from a 50% loss requires a 100% gain. Embracing strategies that focus on limiting drawdown periods can lead to better financial outcomes, enabling individuals to achieve reasonable performance in both bear and bull markets without the necessity of matching peak performance levels.
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