You Don’t Get Dealt Blackjack Every Hand

Our new mar­ket­ing tagline is “Sys­tem­at­ic Out­per­for­mance.” Tony came up with it last week and I love it. Appar­ent­ly he’s not just a pret­ty face. But he also said some­thing else on the pod­cast this week that’s worth drilling down on.

When it comes to invest­ing, the mis­take I think a lot of us make is think­ing like this: if a strat­e­gy actu­al­ly beats the mar­ket, it should beat the mar­ket every year. And if it has a flat year, or a bad year, then some­thing must be bro­ken. Time to change it, tin­ker with it, or bail out and go back to tips from the bloke at the bar­be­cue or that sem­i­nar I saw adver­tised on Face­book.

That’s human nature. We want the graph to always go up and to the right in a nice smooth line, every quar­ter, for­ev­er and ever, amen. And the whole finance indus­try feeds the fan­ta­sy, because “con­sis­tent out­per­for­mance” sells a lot bet­ter than the truth.

Here’s the truth. Out­per­for­mance is lumpy.

Maybe “Lumpy Out­per­for­mance” is even bet­ter than “Sys­tem­at­ic”, but it prob­a­bly isn’t as mar­ketable. Any­way, I digress.

Let me show you what I mean with our own num­bers, because we pub­lish them and you can check them on our web­site.

The QAV AU Mod­el Port­fo­lio (for­mer­ly known as the Dum­my Port­fo­lio) has been run­ning since April 2019. Over those sev­en finan­cial years it’s returned about 16.1% a year, against the SPDR ASX 200’s 7.7%. Bet­ter than dou­ble the mar­ket. That’s the “Sys­tem­at­ic Out­per­for­mance” the tagline is talk­ing about, and it’s real and it’s ver­i­fi­able.

But look under the bon­net and it’s any­thing but smooth.

Take FY2022-23 and FY2023-24. The index ran 14.5%, then 12.2%. We did 10.8%, then 9.4%. Two years run­ning we did­n’t just have a bor­ing year — we lost to the mar­ket. By 3.7 points, then 2.8. Two straight years fol­low­ing the exact same rules that had thrashed the index the year before and would thrash it again the year after. That is what lumpy looks like, and it does not feel like a sys­tem work­ing. It feels like a sys­tem bro­ken.

If you’d thrown in the tow­el at the end of that sec­ond los­ing year — and plen­ty did — you’d have walked away right before FY2025-26, when the Mod­el Port­fo­lio did 28% against the mar­ket’s 5.8%.

That’s what most years look like. A lit­tle bit in front. Some­times a lit­tle bit behind. And then, every few years, the mar­ket hands you a black­jack.

This finan­cial year just gone was one of the good hands. The sev­en gods were good to us this year (yes, I’m watch­ing House Of The Drag­on). Mem­bers have been email­ing their FY26 results and some of them are ridicu­lous. Jim up 74.5%. Scott up 26.6%. Daryl up around 34% and his win-loss ratio jumped from 55/45 to 70/30. Tony rolled off 17.5% against an STW that did about 5.8%, so near­ly triple mar­ket. These are not aver­age years. These are the fish you catch once every few sea­sons.

The mis­take is think­ing those years are the nor­mal ones and the flat years are the fail­ures. They aren’t fail­ures, they are the nor­mal years.

My favourite exam­ple is Ed. Ed’s been with us since the dark ages and he wrote in this week with the first gen­uine­ly hap­py email I’ve had from him in years. His run: down 4.5%, then up 8.3%, then up 3.7%, then up 13.3%, then up 15.5% this year. Look at those first three num­bers. Years of just keep­ing pace, or worse. If Ed had quit after year three — and plen­ty of peo­ple did — he’d have locked in the mediocre part and missed the part that made it all worth­while. As he put it, it’s easy to stay faith­ful when every­thing’s green. It’s hard when it goes red and Rule 1 keeps trig­ger­ing week after week.

As TK said on the show: You don’t get dealt black­jack every hand. You can’t sit out the bor­ing cards and stroll back to the table only for the good one. You have to play every hand the way the rules tell you to, so that you’re still sit­ting there when the good one comes. The sys­tem Tony designed stops us from los­ing cap­i­tal dur­ing those years. It keeps us at the table, patient­ly play­ing hands, wait­ing for vingt-et-un. Because you nev­er know when the black­jack year is going to start.

And that’s some­thing most of the pro­fes­sion­al investors can’t do, and it’s our edge.

Accord­ing to SPI­VA’s Aus­tralia score­card for the year end­ed Decem­ber 2025, 74% of active Aus­tralian equi­ty funds under­per­formed the ASX 200 that year. Over the full decade, a sol­id major­i­ty under­per­formed in every cat­e­go­ry. Get paid a for­tune to trail the index. Nice work if you can get it.

Part of the rea­son is struc­tur­al, and it’s the same lumpi­ness we’re talk­ing about. When a fund has a flat or down year, its investors pan­ic and pull their mon­ey out. The man­ag­er is forced to sell into weak­ness to fund the redemp­tions — and, as Tony points out, the down year is very often the year right before the big one. They get liq­ui­dat­ed out of their own recov­ery.

You don’t have that prob­lem. You can sit through the aver­age years and be there for the black­jack. But you’ve got­ta have the cojones to stick it out.

So when we say “Sys­tem­at­ic Out­per­for­mance,” don’t read it as “we beat the mar­ket every sin­gle year.” Read it as this: fol­low the rules through the bor­ing hands, and the math com­pounds to rough­ly dou­ble the mar­ket over time.

The sys­tem does­n’t promise you a good hand every deal. It promis­es that if you keep play­ing the way the rules tell you to, you’ll still be sit­ting at the table when the good hands come around.

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QAV Myth Killers is a week­ly col­umn in the QAV newslet­ter, tak­ing apart a piece of
invest­ing con­ven­tion­al wis­dom. Read the series, or
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