One of the biggest behavioral challenges in investing is the tendency for investors to focus on individual holdings rather than evaluating their portfolio as a whole. This phenomenon, known as line-item bias, can lead to premature selling of diversifying investments simply because they underperform traditional stock and bond allocations in certain periods.

A prime example of this bias is seen in alternative investments like managed futures, which have historically performed well during equity downturns but can experience extended stretches of underperformance in strong bull markets. When managed futures struggle while stocks rally, investors often feel compelled to sell them—even though they are precisely the asset class that helps offset future drawdowns.

The Return Stacking Solution

Return stacking directly addresses this behavioral challenge by integrating diversifiers into a single portfolio allocation rather than keeping them as standalone investments. A 100% stocks + 100% managed futures approach eliminates the visibility of separate, underperforming positions, reducing the emotional impulse to make short-term trading decisions.

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