The Meb Faber Show

Episode 14 is easily one of our most interesting so far. While there’s great content about trend following, Eric and Meb also delve into the psychological side of investing. There’s a fascinating tension between what people say they want from investing, versus what they actually do. For instance, investors say that want diversification, but very few, in practice, are willing to implement a truly diversified portfolio. Why? The psychological trauma that people experience when they diversify (and watch parts of their portfolio draw down) is simply too painful. This leads into a discussion about one of Eric and Meb’s favorite ways to diversify a portfolio: managed futures. The numbers suggest managed futures are a fantastic addition to a portfolio. Eric ran an experiment with his clients involving portfolio construction. He presented clients the returns and volatility numbers of a handful of asset classes – without revealing what those asset classes were. 100% of the time, when presented blind, people chose mana