Limiting Drawdowns Rather Than Maximizing Returns

By Tim NortonPosted on February 28, 2019August 8, 2019Cat investing, Risk Avoidance, TechnologyLeave a comment

Prominent asset manager Mary Meeker once said her primary goal is limiting drawdowns! While most portfolio construction is explicitly or implicitly focused on returns, she knew that minimizing events that can decimate the portfolio is more important for long term gains than trying to maximize growth periods. Famously, a portfolio needs to double to make… Read More »

Machine Learning in Finance and Investing

By Tim NortonPosted on February 26, 2019Cat investing, Portfolio Modeling, Risk Avoidance, Technology2 Comments

The first time I heard the term ‘Artificial Intelligence’ was in the 1980s, when my dad worked for Digital Equipment Corporation, in the Silicon Valley of the East (Massachusetts). And yes they made computer chips from Silicon. In the 80’s Artificial Intelligence referred to, basically, complex logical structures, with each decision leading to a tree… Read More »

How To Best Evaluate A Portfolio

By Tim NortonPosted on February 13, 2019Cat investing, Portfolio Modeling, Risk Avoidance, TechnologyLeave a comment

Recently I saw an article about Monte Carlo Analysis, which (as you know) is a way to evaluate a person’s ability to meet their future income needs. Using a portfolio of securities or asset allocations it runs through as many rolling periods as available in the data, to come up with a probability of meeting… Read More »

Passive Investing Creates Opportunities for Active Pros

By Tim NortonPosted on February 7, 2019Cat Active, investing, PassiveLeave a comment

It's commonly known in the industry that passive investing keeps growing and active investing is under pressure from all sides. First there are fees. For a decade or more, books have been written about the impact of fees on portfolios. The late John Bogle was one of the pioneers and thought leaders here. Second, performance… Read More »

A Better Portfolio Optimization Method

By Tim NortonPosted on February 5, 2019May 23, 2019Cat investing, Portfolio Modeling, Risk Avoidance, Technology7 Comments

You may have heard of Markowitz’s Critical Line Algorithm, or CLA. CLA was Markowitz’s attempt to solve the problem of portfolio optimization using quadratic math. For a couple reasons is was an ingenious invention. But it also has its problems. The problem with CLA is that it demonstrates large changes in the portfolio with small… Read More »