Why am I the worst stock picker in the world?
After more than 5 years of interest in the investment world, I can say with total conviction that I am the worst stock-picker in the world at the moment, it may seem a complete exaggeration, but I can attest to it.
In this period, I have tried to learn a lot about the main investors in history where I could highlight Ben Graham, Peter Lynch, Warren Buffett, Ray Dalio, Cliff Asness, Howard Marks, John Bogle or Nassim N. Taleb among others. Imagine all the investment styles that I have been able to go through, from reading letters to investors, going through quant investment, to an indexed portfolio (or the ‘All-Weather Portfolio’), all of them with a relatively bad CAGR for how well the indexes have performed. It was not until I got into reading much more about Taleb that I found the empirical sense to this investment, or rather life in general.
I have to admit that it has been his investment style based on ‘Risk Taking’ that has encouraged me to launch the idea of writing in this blog, and I hope that it will help me every day to better understand how to have a portfolio as antifragile as possible to the extreme ups and downs in the market.
The main idea that we must keep from his investment style is that the returns on investment do not follow a normal distribution, since otherwise, the Dow would not have fallen 7.7% in one session in 1997 (one in 50 billion), or rather on October 19, 1987, the Dow would not have fallen 29.2% (one in 10⁵⁰). This is well known to VC investors, whose success or failure comes from 1–5% of their investments.
And do you know what the worst of all this is? That these scenarios will happen again. That is why Taleb proposes a portfolio with a small asset allocation in very high-risk assets, mainly PUTs and CALLs very OTM and the rest of its portfolio in very low-risk assets (gold, silver, CHF, very short term bonds…).
The main idea for the following articles is to be able to go into more detail with tests and demonstrations of how a totally asymmetric portfolio can give excellent returns with relatively low risk.