When Ed Thorpe played blackjack to beat the casinos at their own game, he did it by strategically betting into “good decks” and staying away from bad decks. Can you apply this same idea to investing by investing into good markets, and staying away from bad ones? I believe you can, which is why Geometric…
Category: New Perspective
Your Personal Geometric Frontier
I used to think there was a perfect investment that was best for everyone. A part of me still hopes that’s true, and I use this vision as a proverbial pot of gold to keep driving my investment research forward. But even if I reach the end of the rainbow, I now believe each investor…
How to Maximize Wealth in Retirement
Imagine you’re recently retired and living off your savings and investments. You feel fairly comfortable that you have enough invested to live on for the rest of your life, but you would like to be able to pass on some inheritance to future generations as well. You’re deciding between two portfolios: Portfolio A, which you…
The Greatest Geometric Balancers: Renaissance Technologies, Part II
Let’s pick up where we left off earlier in our exploration of the Geometric Balancing techniques hiding inside Renaissance Technologies’ spectacular returns. For those that don’t remember, we ended part one with Renaissance Technologies–the greatest investment company the world has ever known–having produced their finest returns to date in 1990. Elwyn Berlekamp took over investment…
The Greatest Geometric Balancers: Renaissance Technologies, Part I
Renaissance Technologies is the ultimate Rorschach test in the investing world. Factor investors think they are the best at implementing factors. Machine Learning advocates think they are the best at applying machine learning. Day traders think they are the best day traders. Trend followers think they are the best trend followers. Operations people think they…
Trend Following is Hot Air
Finance strangely views randomness very differently than other academic fields. In physics, gas molecules behave randomly. They could be moving any direction at any speed. You’re not going to predict them with much accuracy. However, when you group them together and measure the properties of the gas collectively, the behavior doesn’t seem random any longer.…
The Arithmetic Return Doesn’t Exist
The Arithmetic Return Doesn’t Exist. It’s a dream that isn’t real. Like waves crashing against an ocean cliff, the relentlessness of time simply overwhelms the arithmetic return. In the short term the cliff exists. But with enough repetitions, with enough crashes of the waves along its surface, it will grow smaller until ultimately the cliff…
The Shape of Rebalancing: Why Some Studies Don’t Find a Rebalancing Benefit
The great age of rebalancing is upon us, and yet many people will ignore this superpower. They will point out some studies claim rebalancing doesn’t help. Those studies are flawed, and I’m going to show you why. By exploring further how rebalancing works, you will see why prior studies on rebalancing may have missed its…
The Great Age of Rebalancing Begins
Sometimes I’m asked why Geometric Balancing hasn’t been invented and implemented already? Well in many ways it was invented decades ago. But there are two main reasons why it hasn’t been implemented in any widespread capacity yet. The first is psychological.1 Rebalancing costs were the second, and more important reason. Let’s explore through the lens of Shannon’s Demon.…
Reflecting At The Milestones: Implementing the Partial Kelly Strategy
We’ve taken a long journey together through the world of Geometric Balancing, traveling through some deep concepts together: We’ve learned about the geometric return and why it’s all that matters. We’ve acknowledged that the investing returns look mostly random. We’ve explored why rebalancing improves returns by moving them from the geometric to the higher arithmetic…