The answer: if an investor can avoid the losses, it takes only 27% of the positive gains to match the market. And, if losses are contained to 50% of the market drop, it takes only 62% of the gains to achieve market returns.
The following analysis details why your best allocation offense may be in avoiding losses.
Hedge Funds are criticized for not getting much return during market declines and then not being able to beat the stock market on the upside. Yet when we look at cumulative performance we can find superior long/short mutual funds that have outperformed the S&P 500 index over the last full market cycle.