Here’s the kicker, folks: The value-profitability strategy would have also smoothed the bumps that kept jostling Miller's investors during those same years.

The value-profitability strategy would have had a standard deviation of 15.6 percent, whereas the Value Trust had a standard deviation of 19.1 percent. The value-profitability strategy’s lower standard deviation isn’t just theoretical hocus-pocus––it would have eased the pain when it mattered most. When the Value Trust tumbled 55 percent in 2008, the value-profitability strategy would have declined 32 percent that year, or nearly half the decline suffered by the Value Trust.

The objective of Miller’s new fund is to beat the S&P 500 with less volatility. The Sharpe Ratio is a common measure of risk-adjusted returns, and a higher Sharpe Ratio indicates a better return-for-risk tradeoff. The value-profitability strategy would have had a Sharpe Ratio of 0.61, while the S&P 500 had a Sharpe Ratio of 0.45, and the Value Trust had a Sharp Ratio of 0.44. That means the return-for-risk tradeoff would have been nearly 40 percent better for the value-profitability strategy.  

All of this reminds me of folksy adages about the virtues of simplicity when it comes to shrewd investing, such as:

* The best strategies are the simplest strategies.

* The best strategies can fit on an index card.

* Don’t invest in a strategy you don’t understand.

The central wisdom in all of these investing guidelines is that consistency is likely to be the most important element of success. It's crucial to stick with a simple, easy to understand strategy over time, especially when the road gets bumpy.

I have no doubt that Miller understands every nuance of the earthquake-predicting model he’s chosen for his new fund. But maybe he doesn’t need complicated models to get where he wants to go. Maybe he just needs to keep it simple.

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