Wednesday, December 12, 2007
Focus on Excellence
What are the few things that you do superbly well? Saty focus on them.
There are different approaches towards investment.
My specific knowledge is on physics and mathematics. The statistical methods in physics apply well to financial markets at large but not to individual company. When I thought about this 5 years ago, I changed my investment primary from stocks to mutual funds. This did not produce higher return, but it's a way for stable return with lower risk.
The specific knowledge on my advisor is on funds and communications. There are house view and analysis available from the banks I am using as well as IFA. Mathematically, an "optimal" portfolio is available if alpha, beta and the correlation matrix is known. That's something I started with. Next, I plan to taken into account the strength of the financial advisors in banks and IFA. I plan to evolve my investment portfolio by systematic improvement; exploiting one success after the other.
If investment is viewed as a business, profit can be viewed as the "risk premium" that covers the costs of staying in investment (market risk and uncertainty). Seen from this point of view, there is no such thing as "profit"; there are only costs of staying in the market. And the task of investment is to provide adequately for those "costs of staying in the market". I think this kind of economic theory are just fooling people instead of helping people to think clear about the problem.
Continuous improvements eventually transform the operation. However, what consitutes "performance"? If performance is to be improved, we need to define clearly what performance means. I decided that my performance should be measured with the NET risk/return ratio, where net return is gross return measured against the world index. In word, I am seeking a safe way of investment which growth better than the average world.
Changes should result a portfolio with better net risk/return ratio. The system should also encourage advices and the opportunity in surprises. And, unexpected successes ahould be identified and pursue. I think I made some progress in the years.
There are different approaches towards investment.
My specific knowledge is on physics and mathematics. The statistical methods in physics apply well to financial markets at large but not to individual company. When I thought about this 5 years ago, I changed my investment primary from stocks to mutual funds. This did not produce higher return, but it's a way for stable return with lower risk.
The specific knowledge on my advisor is on funds and communications. There are house view and analysis available from the banks I am using as well as IFA. Mathematically, an "optimal" portfolio is available if alpha, beta and the correlation matrix is known. That's something I started with. Next, I plan to taken into account the strength of the financial advisors in banks and IFA. I plan to evolve my investment portfolio by systematic improvement; exploiting one success after the other.
If investment is viewed as a business, profit can be viewed as the "risk premium" that covers the costs of staying in investment (market risk and uncertainty). Seen from this point of view, there is no such thing as "profit"; there are only costs of staying in the market. And the task of investment is to provide adequately for those "costs of staying in the market". I think this kind of economic theory are just fooling people instead of helping people to think clear about the problem.
Continuous improvements eventually transform the operation. However, what consitutes "performance"? If performance is to be improved, we need to define clearly what performance means. I decided that my performance should be measured with the NET risk/return ratio, where net return is gross return measured against the world index. In word, I am seeking a safe way of investment which growth better than the average world.
Changes should result a portfolio with better net risk/return ratio. The system should also encourage advices and the opportunity in surprises. And, unexpected successes ahould be identified and pursue. I think I made some progress in the years.
# posted by Lobo @ 6:28 AM 
