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…
Category: Philosophy
What Four Wise Investors Teach Us About Geometric Balancing
Does Geometric Balancing have the potential to become extreme? Does it ever call for a portfolio that’s unjustified, or way outside conventional thought? Sometimes the portfolio will be “wrong”, and when it is should you fear the consequences? I’ve spend hours thinking about this, and came to an interesting conclusion. I think of the question this…
Rebalance Frequency
The violent market moves last Thursday produced a dramatic change in the Geometric Balancing portfolio, which is why I rebalanced mid-week. Rebalancing mid-week is the one part of my strategy which isn’t 100% system based, although that will change going forward. I’ll explain why in this post, and also discuss why I rebalance when I…
Kelly Investing is About Slope
I left you hanging a few weeks ago, and it’s time to pick the thread back up. In my prior post I explained why factors of safeties are important in engineering and equated the factor of safety to using partial Kelly in investing. But I didn’t explain how to use partial Kelly. What I’m about…
Leverage Aversion
A part of classical portfolio theory has always bugged me. It treats levered strategies fundamentally the same as ones that don’t borrow. I think that inherently everyone knows they are very different. Before we dive in, think about this question: Modern Portfolio Theory Modern portfolio theory says the logical investment strategy is to invest at…
Along the Curve.
A funny thing about the top of a curve: it’s flat. This flatness leads to an interesting investment question: are you willing to give up some return to reduce the bumpiness of the ride? The Flat Top When you look at the geometric frontier as a whole and not just the top point by itself,…
Factor of Safety
Surprisingly, designing a bridge or building has similarities to constructing an investment portfolio. We’re going to discuss some engineering concepts for a bit. Bear with me, because I will connect each and every one back to the investing world. Imagine you have to design a structural beam. To design this beam the engineer must understand…
Portfolio on 5.29.20
Up 0.9% for the week. The strategy is back within a quarter of a percent from the daily high set on the 21st of February. It set a new monthly high today, up nearly 5% for the year. Why Is This Working? Since the strategy is now above it’s prior level on the day the…
The Road Not Taken
You have a journey to make. You need to head west 15 miles as the crow flies over a mountain ridge, and then go 15 miles down the valley on the other side. So you head out for a drive. The start of the trip entails climbing up and over the ridge, and is full…
Optimum Portfolio: Two Assets and Cash
Time to get to some unfinished business. A few months ago I said I would shortly discuss adding cash to create a small geometrically optimized portfolio. I’ve taken too long to get this post out. So here is the process to maximize the geometric return of two assets and cash. Additionally I’ll show you how…