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.

Why I Never Use Stop Losses (And You Shouldn't Either)

“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.

How Fractional Differencing Revolutionized My Feature Engineering for Investment Strategies

As a theoretical physicist turned systematic investor, I’ve always been fascinated by the mathematical structures underlying financial markets. While most investors focus on price movements and traditional technical indicators, I discovered that the real edge comes from understanding the deeper statistical properties of market data—particularly how to extract meaningful features that preserve both trend information and stationarity.

Why I Stopped Believing You Have to Choose Between High Returns and Low Risk

Every investor gets told the same story: if you want high returns, you have to accept high risk. Want to play it safe? You’ll have to settle for mediocre returns. It’s supposedly the fundamental law of investing, as immutable as gravity.

The One Number That Changed How I Think About Investment Risk

For years, I focused on the wrong metric when evaluating my investment performance. Like most investors, I obsessed over returns. How much did I make this month? How much did I make this year? How did my portfolio compare to the S&P 500?

Trend Following Strategies: What 137 Years of Research Reveals (2024 Guide)

Trend following has long been a cornerstone strategy for traders and investors. By systematically riding market momentum, trend following strategies have historically delivered strong risk-adjusted returns across various asset classes. But how does the strategy hold up in different environments, and what does academic research say about its efficacy? Let’s explore the key insights from a wealth of scientific literature on trend following.

9 Proven Strategies to Reduce Portfolio Drawdowns in 2024 (Expert Guide)

In 2024, investors are more conscious than ever of the impact of market downturns on their portfolios. With global economic uncertainty and volatile market dynamics,reducing drawdowns - the peak-to-trough declines portfolio value - has become a key focus. By employing the right strategies, investors can protect their wealth and reduce the anxiety associated with significant losses. Below, we explore several actionable strategies to reduce portfolio drawdowns, helping you maintain steadier returns over the long term.

Risk Management