Gyroscopic Investing

Clive wrote: I wasn't criticising the 100%/-50% statement Craig, rather just highlighting how as an overall average the best asset more than compensated for the worse asset on average.

Clive wrote: In Fail Safe Investing Harry said During a bull market, for example, stocks, bonds, or gold might go up 100% or 200% — or even more. But in a bear market a losing investment drops between, say, 15% and 40%. Thus it’s usual for the winner to more than cancel out the losses of the poorer investments during any particular economic environment.

As a simple test I used real (after inflation) gains for each of stocks, silver and 1 year yield from 1875 and found that the best asset each year on average rose by 18.3% whilst the worse asset each year lost 8.3%. The middle asset of the three averaged 2.6%.

Silver near enough produced an overall 0% real return over the entire period, but clearly combining stocks with silver produced an overall positive bias effect (one asset rising 18%, another losing -8% is a +5% average for the two).

Code: Select all

Real % Gains 1875 to 2010 inclusive				
Stocks	Silver	1 Yr T Best	Worse  Middle
10.6	4.6	10.7	10.7	4.6	10.6
-14.6	-6.5	4.5	4.5	-14.6	-6.5
12.6	7.8	20.7	20.7	7.8	12.6
26.0	1.1	15.2	26.0	1.1	15.2
27.6	-16.7	-16.4	27.6	-16.7	-16.4
31.9	3.3	10.8	31.9	3.3	10.8
-7.3	-6.9	-3.3	-3.3	-7.3	-6.9
5.4	-0.8	7.1	7.1	-0.8	5.4
2.5	8.6	13.0	13.0	2.5	8.6
-1.9	8.0	16.0	16.0	-1.9	8.0
31.8	-1.3	7.7	31.8	-1.3	7.7
11.5	-2.5	4.3	11.5	-2.5	4.3
-5.1	-8.3	1.3	1.3	-8.3	-5.1
7.6	1.0	9.6	9.6	1.0	7.6
11.6	7.2	9.4	11.6	7.2	9.4
-8.4	7.6	2.9	7.6	-8.4	2.9
24.5	-3.4	12.1	24.5	-3.4	12.1
-1.6	-19.9	-3.9	-1.6	-19.9	-3.9
-5.3	-3.1	21.8	21.8	-5.3	-3.1
7.4	-8.4	7.5	7.5	-8.4	7.4
3.5	8.6	1.6	8.6	1.6	3.5
5.9	0.9	8.6	8.6	0.9	5.9
17.0	-14.1	0.5	17.0	-14.1	0.5
27.3	0.8	2.1	27.3	0.8	2.1
-13.1	-17.4	-13.5	-13.1	-17.4	-13.5
23.2	10.4	7.0	23.2	7.0	10.4
16.9	-16.4	1.8	16.9	-16.4	1.8
-1.4	-22.4	-4.9	-1.4	-22.4	-4.9
-12.5	19.4	9.9	19.4	-12.5	9.9
28.5	7.0	2.0	28.5	2.0	7.0
21.0	7.0	4.2	21.0	4.2	7.0
-3.6	1.8	1.0	1.8	-3.6	1.0
-21.6	-18.5	8.4	8.4	-21.6	-18.5
34.8	-13.8	2.0	34.8	-13.8	2.0
5.5	-3.6	-7.0	5.5	-7.0	-3.6
3.4	11.3	12.0	12.0	3.4	11.3
4.5	1.6	5.0	5.0	1.6	4.5
-0.1	7.8	-2.9	7.8	-2.9	-0.1
-6.9	-10.8	3.6	3.6	-10.8	-6.9
-6.6	-14.9	3.6	3.6	-14.9	-6.6
27.5	8.6	0.7	27.5	0.7	8.6
-3.9	22.6	-8.9	22.6	-8.9	-3.9
-37.1	-1.1	-15.4	-1.1	-37.1	-15.4
-1.1	-4.5	-11.9	-1.1	-11.9	-4.5
2.3	14.1	-11.4	14.1	-11.4	2.3
-12.1	-49.4	8.9	8.9	-49.4	-12.1
20.2	12.3	18.5	20.2	12.3	18.5
29.5	-2.4	5.2	29.5	-2.4	5.2
2.2	-1.9	2.0	2.2	-1.9	2.0
26.0	6.5	4.3	26.0	4.3	6.5
21.8	-3.5	0.4	21.8	-3.5	0.4
13.6	-19.9	6.5	13.6	-19.9	6.5
37.7	9.3	5.4	37.7	5.4	9.3
47.8	0.1	5.8	47.8	0.1	5.8
-8.8	-15.4	6.0	6.0	-15.4	-8.8
-14.9	-25.4	11.2	11.2	-25.4	-14.9
-32.9	2.2	12.5	12.5	-32.9	2.2
1.2	-6.7	13.2	13.2	-6.7	1.2
52.5	69.7	-0.9	69.7	-0.9	52.5
-10.9	21.5	-2.0	21.5	-10.9	-2.0
52.2	5.9	-0.7	52.2	-0.7	5.9
30.9	-24.4	-1.4	30.9	-24.4	-1.4
-31.9	-4.2	0.2	0.2	-31.9	-4.2
16.4	-0.9	2.3	16.4	-0.9	2.3
4.1	-17.5	1.3	4.1	-17.5	1.3
-10.2	-2.0	-0.9	-0.9	-10.2	-2.0
-20.0	-10.5	-10.8	-10.5	-20.0	-10.8
12.0	20.0	-7.0	20.0	-7.0	12.0
20.5	-3.0	-2.3	20.5	-3.0	-2.3
16.9	-2.3	-1.6	16.9	-2.3	-1.6
36.2	55.8	-1.5	55.8	-1.5	36.2
-29.8	4.3	-17.4	4.3	-29.8	-17.4
-7.2	-24.2	-9.2	-7.2	-24.2	-9.2
8.6	-7.4	0.1	8.6	-7.4	0.1
19.4	6.8	3.7	19.4	3.7	6.8
26.3	1.1	-6.8	26.3	-6.8	1.1
16.4	5.7	-2.2	16.4	-2.2	5.7
13.7	-5.7	2.0	13.7	-5.7	2.0
1.7	1.3	1.5	1.7	1.3	1.5
46.6	0.7	2.5	46.6	0.7	2.5
28.2	5.7	1.4	28.2	1.4	5.7
3.9	-2.0	0.2	3.9	-2.0	0.2
-9.2	-5.4	0.2	0.2	-9.2	-5.4
38.1	-1.3	1.1	38.1	-1.3	1.1
6.6	0.6	2.7	6.6	0.6	2.7
4.6	-1.7	2.6	4.6	-1.7	2.6
18.4	12.3	2.2	18.4	2.2	12.3
-4.1	14.7	2.1	14.7	-4.1	2.1
19.4	6.2	1.9	19.4	1.9	6.2
14.9	-1.0	3.1	14.9	-1.0	3.1
9.6	-1.9	2.5	9.6	-1.9	2.5
-9.9	-3.5	2.0	2.0	-9.9	-3.5
12.4	55.7	1.9	55.7	1.9	12.4
6.2	-9.3	1.8	6.2	-9.3	1.8
-14.6	-13.9	1.9	1.9	-14.6	-13.9
1.7	-14.8	3.8	3.8	-14.8	1.7
10.5	-16.2	2.4	10.5	-16.2	2.4
14.0	5.5	1.0	14.0	1.0	5.5
-25.4	42.4	-1.5	42.4	-25.4	-1.5
-32.6	71.7	-0.8	71.7	-32.6	-0.8
31.8	-12.0	0.5	31.8	-12.0	0.5
6.1	-6.9	0.5	6.1	-6.9	0.5
-15.4	-0.4	-1.6	-0.4	-15.4	-1.6
6.8	7.7	-1.5	7.7	-1.5	6.8
2.9	90.2	-3.0	90.2	-3.0	2.9
13.7	77.8	-0.5	77.8	-0.5	13.7
-15.2	-58.4	9.2	9.2	-58.4	-15.2
25.2	-28.2	10.9	25.2	-28.2	10.9
16.1	40.1	5.2	40.1	5.2	16.1
4.1	-32.3	7.6	7.6	-32.3	4.1
22.0	-28.6	4.5	22.0	-28.6	4.5
29.6	-12.3	5.9	29.6	-12.3	5.9
-6.0	24.3	2.2	24.3	-6.0	2.2
13.2	-11.6	3.0	13.2	-11.6	3.0
17.8	-21.0	4.1	17.8	-21.0	4.1
-6.3	-17.8	2.8	2.8	-17.8	-6.3
29.0	-18.6	4.3	29.0	-18.6	4.3
4.3	-6.0	0.7	4.3	-6.0	0.7
9.0	6.8	0.9	9.0	0.9	6.8
-1.7	19.7	1.5	19.7	-1.7	1.5
32.3	-4.4	3.7	32.3	-4.4	3.7
24.1	-3.0	2.6	24.1	-3.0	2.6
26.2	-7.4	4.2	26.2	-7.4	4.2
29.6	11.4	4.0	29.6	4.0	11.4
12.8	-8.5	2.6	12.8	-8.5	2.6
-9.2	-8.8	2.9	2.9	-9.2	-8.8
-14.3	-12.9	3.5	3.5	-14.3	-12.9
-22.6	2.6	-0.7	2.6	-22.6	-0.7
20.6	4.2	-0.7	20.6	-0.7	4.2
9.8	33.5	-1.5	33.5	-1.5	9.8
3.1	5.8	-0.6	5.8	-0.6	3.1
12.1	55.9	3.2	55.9	3.2	12.1
2.1	11.6	1.0	11.6	1.0	2.1
-38.7	12.0	3.4	12.0	-38.7	3.4
26.5	45.1	-1.6	45.1	-1.6	26.5
12.2	80.9	-1.2	80.9	-1.2	12.2

		Average	18.3	-8.3	2.6