[For performance results click here]

The Austrian Strategy is a prudent bet on simplicity and intellectual humility as a better investment strategy in a complex and unpredictable world.

The most important success factor of any investment (once costs are minimized and we have learned to control our emotional behavior) is choosing the appropriate strategy that fits both the nature of markets and our own nature.

First, I will clearly state the objectives of the Austrian Strategy. Then, I will configure the investment process in 3 steps.

Objectives of the Strategy

The aim of the Austrian Strategy is to provide a prudent yet effective way of investing, to satisfy the demand for a simple and diversified multi-asset core holding for prudent investors with the following objectives:

  • Preservation of wealth during recessions and crises with steady capital growth across all economic environments.
  • Clarity and profitability to the prudent and risk-averse investor, generating equity-like and gold-like returns over the medium-long term but with much less volatility and smaller drawdowns (see performance statistics → here).
  • A true back to basics, simple and robust strategy, which inherits millenary investment wisdom, economic sense and empirical evidence. (More about the power of simplicity → here).

Investment Process: A Strategy in 3 Steps

Simplicity is the ultimate sophistication

—Leonardo da Vinci

The Austrian Strategy I present, minimizing complexity and embracing uncertainty, is based on the Austrian School of Economics, and validated by empirical evidence. Without digressing from the basic investment principles established over millennia, the Austrian Strategy logically and empirically answers the three standard investment questions in the most simple and robust way:

(For a more in-depth explanation, please click and follow the link on each question)

  1. What assets to invest in?
    1. If the future is unpredictable; we must invest in as many assets as necessary to be able to cover any future scenario. That is, the universe of assets has to be able to monetize any future economic conditions of growth, recession, inflation, and deflation.
    2. Consequently, the Austrian Strategy invests globally into these assets through low-cost ETFs exposure to its indexes (when available).
  2. What asset allocation to implement?
    1. Empirical evidence shows that it is impossible to forecast markets consistently.
    2. As it is impossible to forecast which asset will outperform in the future, there is no rational justification to weight one asset more than another. Therefore, the Austrian Strategy will implement an equally-weighted portfolio asset allocation model.
  3. What risk control to run?
    1. Being unable to forecast the future, the Austrian Strategy implements a reactive (not predictive) convex risk management.
    2. Convexity is achieved in a Risk-On Risk-Off dynamic way. Following my proprietary risk management based on momentum, the Austrian Strategy limits the deep and prolonged losses that each asset periodically suffers while lets profits run during bull markets as long as they last.

The Austrian Strategy solution on how to invest can be summarized as:

Invest in a low-cost, equally-weighted global portfolio, covering all possible states of the economic cycle with the sufficient classic asset classes, using indexing and providing with momentum a convex risk control to the whole portfolio

Properties of the Austrian Strategy:

This approach produces a simple yet robust strategy that can generate equity-like returns over the medium to long-term but with less than half the risk (in drawdowns and volatility)

The strategy provides a solid core for investors’ portfolios with the following main properties:

    • Equity-like returns over the medium to long-term but with less than half the risk (in drawdowns and volatility)
    • Asset Class diversified
    • Globally diversified
    • Non-judgmental
    • Long-only
    • No leverage
    • Robust
    • Transparent
    • Liquid
    • Simple to understand and to follow

See the performance results → here.