Financial advisors use alpha and beta to assist you in your investment decisions. Alpha is relative performance adjusted for the volatility (beta). In theory alpha is a measure of the manager’s stock picking ability. This approach probably works for short term investing where you have a limited timeframe for the investment to be profitable.

Long term buy and hold strategies are governed by a totally different set of rules. Selling is not an option except for rules of the strategy such as rebalancing. The best relative performance is the best choice. Volatility will dictate the magnitude of drawdown. Performance is the measure of profitability including drawdown. Drawdown only causes a short term reduction in value but not long term performance.

As returns and holding period increase the accuracy of the strategy goes to 100% because prices have risen so much that you never have a loss. If you never have a loss the real risk is zero. A wiggle now does not affect the long term performance. If there is no volatility, there is no performance.

Most wealth is created by buy and hold strategies. For the investor the best holdings are cap weighted ETFs. The Stars model holds SPY and TQQQ. The phenomenal performance is due to the rebalancing of the volatile TQQQ. The long term risk of Stars is zero not some risk adjusted value.