We have been doing a ton of thinking around here on portfolio theory and optimization in an IOI context of late. If you’re an IOI reader or alum of our coursework, particularly IOI 103 – Structuring Investments, then you know we are more than a little concerned with probabilities and working to make investments that tilt the odds of positive returns in our favor. From there, we think carefully about sizing the position against those probabilities.
So, this short piece in the Economist’s Investing section this week caught our eye – Irrational Tossers. The article describes a coin toss based investing experiment given to a group of “finance people”. I won’t spoil the read by telling you the results except to say that your use of probabilities and probabilistic thinking matters.
In the meantime, Invest Intelligently.