The hardest part of investing isn’t the math
The Sandbox Daily (1.13.2026)
Welcome, Sandbox friends.
Today’s Daily discusses:
the best portfolio is the one you can stick with
Let’s dig in.
Blake
Markets in review
EQUITIES: Russell 2000 -0.10% | Nasdaq 100 -0.18% | S&P 500 -0.19% | Dow -0.80%
FIXED INCOME: Barclays Agg Bond +0.09% | High Yield +0.01% | 2yr UST 3.530% | 10yr UST 4.177%
COMMODITIES: Brent Crude +2.35% to $65.37/barrel. Gold -0.45% to $4,594.4/oz.
BITCOIN: +3.28% to $94,137
US DOLLAR INDEX: +0.31% to 99.164
CBOE TOTAL PUT/CALL RATIO: 0.97
VIX: +5.69% to 15.98
Quote of the day
“When you are anxious, you are living in the future. When you are peaceful, you are living in the present.”
- Lao Tzu
The hardest part of investing isn’t math
In The Four Pillars of Investing, William Bernstein writes:
“Investing is a psychological game. A suboptimal strategy you can live with and execute is better than an optimal one you can’t.”
This is perhaps one of the most important considerations that an investor must internalize.
For most people, there is a range of asset allocations that will meet their future financial needs from a strictly mathematical perspective. To choose among those viable portfolio options, one must then set aside a calculator and consider your tolerance for risk and volatility.
This simple, two-step approach helps ensure you can stick with your portfolio through the market’s highs and lows.
In 1986, Gary Brinson, Randolph Hood, and Gilbert Beebower sought to explain the effects of asset allocation policy on pension plan returns. In their seminal paper “Determinants of Portfolio Performance,” the three researchers asserted that asset allocation is the primary determinant of a portfolio’s return variability, with security selection and market timing (together, active management) playing minor roles.
The 1986 study concluded that asset allocation accounted for more than 90% of the return variability among the funds. Subsequent studies have produced similar results.
What’s clear from these historical studies is asset allocation will be the primary determinant of your future financial returns.
Not stock picking, not market timing (exhibit A, exhibit B), and not fees.
And yet, in the end, despite all the empirical studies showing the importance of asset allocation, none of it will matter if you can’t stick to the plan during the good times AND the bad times.
The best asset allocation isn’t the one that looks good on paper – it’s the one you can actually live with when the going gets tough.
Asset allocation may drive returns, but behavior determines outcomes.
That’s all for today.
Blake
Questions about your financial goals or future?
Connect with a Sandbox financial advisor – our team is here to support you every step of the way!
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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