5 Things Most Investors Get Wrong About Trend-Following – And Why It’s Worth Rethinking Portfolio Resilience
Trend-following has been a cornerstone strategy for many sophisticated allocators over decades. Yet it remains surprisingly underrepresented in the portfolios of high-net-worth individuals and family offices. Why? Because common misconceptions often overshadow its proven benefits.
Below are five of the most frequent misunderstandings we hear from advisers and investors, and why it’s worth taking a fresh look.
1. “Trend-following doesn’t work anymore.”
It’s a refrain that pops up regularly: “Trend-following is dead.” History tells a different story. During major market dislocations – such as 2008, 2014, 2020, and 2022 — trend-following strategies have often been among the best performers.
The key is understanding that trend-following is cyclical, not broken. It thrives in volatile or directional markets, i.e. precisely when traditional portfolios, heavily reliant on equities and bonds, struggle.
2. “It’s just chasing momentum.”
This is a common oversimplification. Trend-following isn’t about hype, news, or hot sectors. It’s about price confirmation. Systematic, rules-based models scan global markets daily, adjusting exposures based solely on observable price trends.
This removes emotion and narrative bias from the equation, resulting in a disciplined process rather than a speculative bet.
3. “It’s too volatile for wealth preservation.”
Uncorrelated doesn’t mean reckless. In fact, professional trend-following programs explicitly target and manage volatility.
More importantly, trend-following tends to be “long volatility”, meaning it often gains when traditional assets fall sharply. This provides essential ballast in downturns, preserving capital when it matters most.
4. “It’s only for commodity traders.”
That was the perception decades ago, but today’s trend-following strategies are far more diversified. They trade across equities, fixed income, currencies, and commodities, spanning global liquid markets.
These aren’t directional commodity bets; they are dynamic, macro-driven strategies that adapt to evolving market regimes.
5. “It doesn’t belong in a strategic allocation.”
Some treat trend-following as purely tactical or opportunistic. The data challenges this view.
Over full market cycles, trend-following has delivered consistent positive returns, low correlation to traditional assets, and strong risk-adjusted performance — especially in equity crises.
This makes it a powerful core diversifier for multi-asset portfolios focused on resilience.
In the video below, “Elevating the Classic 60/40 Portfolio with Trend Following”, ECCM’s Founder and CIO Adam Havryliv, and Strategy Ambassador Richard Brennan, talk about how trend following’s proactive approach to portfolio management and how it can transform the classic 60/40 portfolio.
Conclusion
At ECCM, we view trend-following not as speculation, but as a portfolio stabiliser.
It requires no forecasting or macro calls, just a robust, repeatable process to adapt as markets shift.
For investors seeking durable, long-term capital growth with reduced drawdowns, trend-following deserves serious consideration.