Variability Drain: The Silent Killer of Long-Term Compounding
- Fabio Capela
- Systematic investing , Portfolio mathematics , Compounding , Risk management , Quantitative finance , Volatility management , Long term investing , Portfolio optimization
You spend years refining your strategy. You optimize your entries and exits. You backtest it across decades. On paper, it shows strong returns. Maybe even impressive alpha. But something keeps bothering you. Despite solid average returns, your portfolio isn’t growing the way you expect. You’re not losing in any dramatic way — no catastrophic drawdowns, no obvious mistakes. But something subtle is bleeding your wealth. Quietly. Relentlessly.
Read MoreWhy I Never Use Stop Losses (And You Shouldn't Either)
- Fabio Capela
- Risk management , Investment strategy , Portfolio management , Systematic investing , Trading psychology , Position sizing , Market volatility , Investment discipline
“You should always use stop losses.”
I’ve heard this advice countless times from financial advisors, trading courses, and investment books. It’s supposed to be one of the fundamental rules of risk management—set a level where you’ll cut your losses and stick to it no matter what.
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