Imagine trying to get fit. You could chase every new diet or workout trend, or you could follow a proven plan. The same goes for investing.
This isn’t just a metaphor. The principles that drive long-term success in health and fitness are surprisingly similar to those that drive long-term success in investing.
At Cambridge Partners, we don’t build portfolios based on hunches or headlines. We build them on decades of research, Nobel Prize-winning ideas, and real-world data. It’s not flashy, but it works.
Structure Over Speculation
Think of investing like building a strong body. You don’t start with supplements or fancy gear. You start with a solid foundation.
That foundation in investing was laid in the 1950s by economist Harry Markowitz, who showed that combining different types of investments could reduce risk without sacrificing returns. It’s like balancing strength, cardio, and recovery. Each plays a role in long-term results.
Later, William Sharpe introduced tools to measure whether the returns you’re getting are worth the risk you’re taking. One of those tools is the Sharpe Ratio, which compares your return to the risk you took to achieve it. The higher the ratio, the better, because it means you’re getting more return for each unit of risk. It’s like tracking your workout efficiency. If two people burn the same number of calories, but one does it with less strain and better recovery, that’s the smarter approach.
And Eugene Fama showed that markets are efficient, meaning prices already reflect all known information.
It reminds me of stepping on one of those smart scales at home. You don’t need to guess how your training or nutrition is going. It instantly provides a breakdown of your body fat, muscle mass, hydration, and even your metabolic age. The data is already there, processed and reflected back to you. That’s what market efficiency is like. The price already knows what you know. You can’t outguess it with yesterday’s news, or even today’s. It’s absorbed fast.
These ideas taught us that structure matters more than stock picking, and that diversification isn’t just smart. It’s essential.
Evidence-Based Investing
In fitness, the fundamentals matter. You don’t need to count every calorie to lose weight, but you do need to stay in a calorie deficit. You don’t need the perfect workout, but you do need consistency and a plan.
Investing works the same way.
In the 1990s, Fama and French identified key drivers of return: market risk, company size, and value. Later research added profitability and how companies reinvest. These are like the macro nutrients of investing. Core ingredients that drive long-term performance.
A major 1986 study by Brinson, Hood, and Beebower found that over 90 percent of portfolio performance comes from asset allocation, not stock picking or market timing. The takeaway is simple – focus on what matters most.
Why Structure Wins
Some investors try to outperform the market by picking stocks or timing their entry and exit. While this can work occasionally, the long-term data tells a different story.
The SPIVA Scorecard consistently shows that most active fund managers underperform their benchmarks over time. Even with experience, research teams, and sophisticated tools, consistently beating the market is incredibly difficult.
And it’s not just fund managers. DALBAR research shows that over 20 years, the average equity investor earned 9.24 percent annually, while the S&P 500 returned 10.35 percent. On a $100,000 investment, that gap means around $131,000 in missed growth. These findings show there is a price to pay for reacting instead of planning.
That’s why we focus on what works more reliably. Structure, evidence, and discipline. Because chasing performance often leads to disappointment, while a well-built portfolio helps investors stay the course.
What Is Your Portfolio Built On?
Your portfolio shouldn’t be built on fads or feelings. It should be built on:
- Decades of academic research
- Real-world data
- A disciplined process
- A deep understanding of investor behaviour
This approach isn’t about chasing returns. It’s about capturing them. Consistently, patiently, and intelligently.
At Cambridge Partners, we believe that good advice is not just about what you invest in, but how you stay invested. Just as in fitness, the best results come from sticking to a plan that works and a plan that considers your needs and goals.
So if your current portfolio doesn’t reflect these principles, it’s worth asking:
What is it built on?