To reach your financial goals, you don’t have to outperform every benchmark every year. For long-term investors, avoiding and mitigating losses is a key factor in achieving ultimate success in your portfolio.
Held every July, the Tour de France is a great illustration of this concept of capital preservation, of which the main purpose is to avoid loss. Cyclists ride for 21 stages over 23 days, this year covering 2,000+ miles. The cumulative leader at the end of each day gets to wear the maillot jaune – the yellow jersey – the next day. The rider who covers the total distance in the least amount of time is the ultimate winner.
In the Tour, time is the capital, and managing it correctly is as much about riding quickly as avoiding unnecessary losses. For investors, money is the capital and like in cycling, it’s the losses that matter. Here’s why.