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Looking at these Bridgewater ideas on optimal portfolios its clear that I'm probably too concentrated on equities right now with a 53-55% allocation plus some of them are leveraged, bringing my actual exposure to more like 66-70%. Thats sort because of that theme that I got going on that Trump...

That article is pretty interesting because Dalio talks about the 2 different ways one can use to juice returns to achieve the return embedded in equities. One is by building an Optimal Beta portfolio (something like the Tangency portfolio) and levering it up to the same level of return as...

Leveraging my portfolio in a way that makes sense is something that I need to explore, it would potentially help me boost my returns while keep my risk controlled and I would be able to pretty much retire from other, more intensive forms of trading such as daytrading.

Dalio: "Is there a downside? Leveraging asset classes and holding a balanced portfolio creates a different type of risk than holding a traditional portfolio with lower expected returns and a higher concentration in equities. Whereas the risk of the traditional portfolio is largely a function of...

They use the Sharpe Ratio quite liberally instead of the Sortino ratio. If you consider the Sharpe Ratio, then that Dalio portfolio gets quite close to my finding of the best Sharpe ratio portfolio since 1928 Dalio is more heavy in long duration bonds but that could because of the 'synthetic'...

"When does this approach lose money? Risk parity loses money when the diversified portfolio of assets has a lower return than cash. What are the risks of this happening? A well-diversified portfolio of assets will underperform cash when a central bank’s tightenings are enough to raise the...

Found this awesome article by Bridgewater talking about their fund after the 2015 turmoil http://www.ahwilliamsco.com/includes/OurThoughtsaboutRiskParityandAllWeather.pdf Its providing further clues about Dalio's 2014 portfolio he gave to Tony Robbins "Isn’t this bond heavy portfolio...

The thing about this 90% of the Taleb portfolio is that it can't be 100% in short-term fixed income of the same country. That would go against the history of financial data plus it would leave one pretty vulnerable to extremes (and it just flat out doesn't work). As a result, I think it makes...

And if the simulation ever were to be done, one thing is almost surely going to be found -every asset class (all stock, bond, currency market plus gold) will lose all its value at some point, not likely at the same time though. by stretching out time like that, its a certainty at some point...

This leads to the idea of, in addition to a balanced portfolio, one should "invest" in extremes as an asset class. it provides further diversification. its not as simples as going around buying options, but buying them in seleced situations, investing in venture capital, biotech, etc

If there is an optimal portfolio for this, it could be -A perfect 'Tangency' portfolio that is balanced against all the extremes -A Taleb type allocation of 90% safety and 10% in stuff that benefits from the extremes Maybe thats why Taleb recommeds that 90/10 allocation. If you think about it...

So lets say I simulate the next 500 years with some extremes in asset prices bigger than seen in the past. Then lets say I simulate 500 "worlds" with 500 years in each them following the same principle. Then I simulate 500 universes with 500 worlds each, and 500 years of simulated asset prices...

Thinking about this simulated world, I find it rather ironic that a guy that Taleb criticizes pretty heavily (Markowitz) is the guy that provides the solution (diversification) in how to cope with this sort of 'Extremistan' problem in asset prices

I'm not saying he is necessarly wrong in investing 100% of his money in the US stock market. If you think you know something that other don't, it might pay to go for it. Especially, because I'm talking about the kind of variance that affects time intervals that are way beyond a human's lifetime...

I was thinking about the "ultimate backtest" of simulating different worlds for 500 years. Essentially what I think would be really cool to do is to look at the last 100 years and simulate the next 500 but to add in some extra variance by including the probabilities of things like: -A greater...

Its another option, I will try to get that Bridgewater short-term data to see if I can run tests on it. Lets see if I can get a hold of that

Perhaps something that can explain Dalio's small 30% weighting in stocks could be if Bridgewater is looking at monthly data instead of yearly data (like me). If they are, then in a month to month basis stocks will be punished a lot more in the Sortino Ratio. Month to month there is crazy...

Maybe what makes sense is going for is the Markowitz-Buffett point (which I just made up), somewhere in between the Tangency Portfolio (the highest Sortino portfolio) and the Buffett "all-in" portfolio (of 100% equities)

I meant the next 100 years Tangency Portfolio But I dont think trying to achieve the "Tangency portfolio", that one with the highest Sortino/Sharpe ratio, makes all the sense in the world. I'm not going to try to hug that point of the Efficient Frontier at all costs. Sometimes there might be...

I run a test for the highest Sortino ratio portfolio that cannot use Gold vs It does worse in risk ratios (Sharpe and Sortino) as well in stuff like SD of Negative Returns, max drawdown (although that field I havent finished coding it and it bugs out sometimes, it cant be relied upon). Worst...