How Volatile Funds Cost Investors Dear

Marcellus contends that portfolio volatility triggers emotional decision-making—'zones of excitement and fear'—that cause investors to underperform despite strong fund returns. The firm cites ARK Innovation Fund (ARKK) as a cautionary example: the fund delivered over 30% CAGR over five years, yet investors collectively lost money since launch in 2014 because inflows surged after the fund peaked in 2020–2021, only to suffer a 23% loss in 2021. Similarly, an Axis Mutual Fund study found Indian equity fund investors underperformed fund returns by as much as 5.5% annually due to poor timing. Marcellus argues that two portfolios delivering identical 25% CAGR over three years will produce different investor outcomes if one achieves that return with high volatility and the other with low volatility. The low-volatility portfolio prevents fear-driven withdrawals and excitement-driven additions, allowing compounding to work uninterrupted. Marcellus' Consistent Compounders PMS has historically exhibited significantly lower volatility than the Nifty50 on a rolling 12-month basis, with a median return of approximately 30% per annum versus 18–24% for the Nifty50, while experiencing fewer negative return periods. The firm manages a 25-stock coverage universe selected for consistent ROCE and revenue growth, with an intended holding period of 8–10 years or longer. Marcellus frames boring consistency—exemplified by cricketer Rahul Dravid's steady accumulation of runs—as superior to volatility-driven excitement for long-term wealth creation.