Cliff Asness, co-founder of AQR Capital Management, recently stated on Bloomberg TV, “I used to think being great at investing long-term was about genius. Genius is still good, but more and more I think it’s about doing something reasonable, that makes sense, and then sticking to it with incredible fortitude through the tough times.”  In other words, you’d be better off long-term by following a consistent, well-diversified investment strategy, regardless of what the markets are doing.

I couldn’t agree more.

I met someone just the other day who told me that she is thinking of leaving her financial advisor. She said he had put most of her investments into gold and other precious metals.  That had worked great a bunch of years ago, she mused, and she had been quite satisfied.  But over the last couple of years she’s lost so much money that she’s now worried she may not have enough to last throughout her retirement.  She’s 66 years old.

I find it hard to believe that there are still advisors out there who recommend such an investment strategy, especially for clients who are on the verge of having to start living off those savings. It is inevitable that although highly volatile assets such as gold may experience periods of tremendous growth at times, they will also go through painful periods of significant declines.  And concentrated positions in almost any asset class are generally a bad idea.  Was the advisor trying to get her much better returns than a more diversified portfolio could provide?  Did he believe that would work long-term?  Was that a reasonable strategy to follow?

Josh Brown, a New York financial advisor, agrees with Asness. “If you want to be great, you must first learn to be good.  Being good means accepting that a strategy that outperforms long-term must have some shorter-term periods during which it is merely average and some periods where it is below average.”   Such an approach would rarely put you among the top investment performers in any given year.  But by the same token, during the bad years, you’re likely to lose much less.  And although you cannot time the market, as I’ve written countless times before, avoiding the bigger losses which are much more difficult to recoup is probably the greatest factor in long-term outperformance.  Brown puts it more succinctly: You will win by not losing big.

To utilize a baseball analogy, most everyone would probably recognize Babe Ruth as the home run king of his era. Do you know who the strike-out king was during the same era?  It was Babe Ruth!  A better strategy, as Michael Lewis recounts in Moneyball, is to go for base hits.  That will more consistently get you on base, ultimately resulting in more runs and consequently more wins than trying to swing for the fences.

You may recall that in 1999 Warren Buffett, the legendary investor, was taken to task by the media for the significant underperformance of his Berkshire Hathaway fund relative to the explosive growth of the dot com company funds. Three years later it was the latter funds that had imploded while Berkshire continued on its traditional way.  Buffett’s track record was phenomenal, according to Asness, mostly because of his consistency.  “What was beyond human was him sticking with [his strategy] for 35 years and rarely, if ever, really retreating from it.”

Does your investment strategy target average returns or top returns? Is it based on consistency or on the latest hot investment opportunity?  As Brown suggests, “Your ability to attain the only returns that count – the long-term returns – will be determined by your answer to these questions.”