It's an area of learning I gravitate to.
* bird's eye heuristics
* why I gravitate to it
* practical implementations
* a handful of follows
1. Geometric returns are what matter. This acknowledges how vol effects compounding.
E(Geo) = E(arithmetic) - ½ σ²
2. All assets are part of a higher-order class: convex or concave
3. Correlation is critical. But can be unreliable. Esp at the wrong time
1. The most reliable form of neg correlation is a put. You pay up for that reliability.
2. Trend strategies have a "speed" which gives them a moneyness. A slower signal is further OTM but costs less. Fewer whipsaws.
Alongside timing and security selection, port const rounds off 3 sources of alpha.
To me, portfolio construction seems like the highest impact expression to work on.
Long term timing seems impossible. Lots of studies using CAPE etc show how difficult this is on any serious timeframe.
While actually evaluating businesses looks like a life's work. Lots of domain expertise.
Port construction feels far more 80/20iable
Investing is a game. Not a simple game. Capital, rates of return, laws. All variables in complex adaptive system. Don't fall for ludic fallacy, yada, yada.
But, let's relax that for a moment.
If I'm overreacting, I'd recall that allocators get fees wrong. https://moontowermeta.com/do-professional-investors-understand-fees/
Fees Are In Focus Retail Giant fund manager/brokerages like Vanguard and Fidelity have made fees front and center. Like Walmart, if you are the lowest cost provider and wield blue whale scale, you...https://moontowermeta.com/do-professional-investors-understand-fees/
Permanent portfolios, trend, hedged programs. Portfolios that don't care about what you think will happen. They have soft (correlation), hard (option), semihard (stops) hedges.
You can lose quick or lose slow.
Tolerances are constraints.
In my whatsapp chats, I see people obsessed with timing. Or trying to pick stocks. Inefficient focus imo. Higher noise to signal.
@breakingthemark (rebalancing work is )
@choffstein & @theNFaber
@GestaltU & @MikePhilbrick99
The setup You invest in 2 coins every week for the next 1000 weeks (19.2 yrs) These coins pay a return each week Every 4 weeks, you rebalance wealth equally between the 2 coins Coins have an expected...https://moontowermeta.com/how-tails-constrain-investment-allocations/
If you have favorite resources on these topics please share them. Especially interested in how port-construction- forward-methods have fared thru the latest chaos.