One of the techniques that’s credited for the success of the British Olympic cycling team under Sir Dave Brailsford is an approach known as the aggregation of marginal gains. The argument is that by making small gains in many areas, the end result is significantly better.
Brailsford says that while going for gold seemed “too daunting” when he became performance director in 2003, the team was able to search for small improvements everywhere “and found countless opportunities”.
Team GB went on to win eight gold medals in cycling at Beijing in 2008 and another eight in London 2012. Having previously won just one since 1908, the change in the cycling team’s fortunes was marked.
Marginal gains in investing?
Not everyone agrees that marginal gains were responsible for the cycling team’s transformation, but for investors the maths is quite compelling.
1% gain each day for one year = 3,780% gain (corrected 16/1 - thanks to the many readers who pointed out this error)
1% decline each day for one year = 97.5% loss
Here at Stockopedia, we’re not looking to win any races. But we do want to find ways of producing investment results that have a consistent edge over the market average. One way I try to do this is by investing some of my cash in a rules-based portfolio.
Regardless of the market mood, my screening rules find stocks with consistent qualities. My trading activity is also governed by rules. This prevents me doing things like panic selling or supersizing my favourite positions.
My hope is that by doing all of this, I’ll be able to avoid the cost of cognitive bias and stay ahead of the market as the years pass. So far, it’s worked out okay. The value of my SIF Folio has increased by 30% since its launch in April 2016. Over the same period, the FTSE All-Share has gained just 8.4%. (Both figures exclude dividends.)
What’s this got to do with Tesco?
I’m sure you don’t need me to remind you of Tesco’s long-running marketing slogan, Every Little Helps. This is aimed at convincing customers of the retailer’s everyday low prices. But I can’t help feeling that since boss ‘Drastic’ Dave Lewis took charge in 2014, this motto has also been applied to the group’s operations.
Mr Lewis…
