Perhaps the trip has to move further back again to the young. Can investment and financial awareness be presented at a youthful age where it can be taught and introduced in a far more compelling manner? Can it be woven in into classroom Maths for example? Games could be another avenue. Any kind of good ones to do so (see Wongamania)? The many popular ones are perhaps too cheesy or simplistic (Monopoly, Life).
Robert Kiyosaki’s Cashflow game is too tuned toward positive cash flow from property investment and perhaps too narrow. Not to mention expensive as heck! You can find localized mobile applications like WhyMoolah. But I didn’t find it particularly fun as it lacks a staying appeal. Since it is, it appears that more young people are checking trading accounts. A sign of greater interest and recognition? But chances are many may be doing so to team team, searching for a quick “rush” and an instant buck. The chance that some will crash and burn off is similarly good.
Hopefully, more will learn and change towards a sustainable approach to stock investing. Perhaps housing could also differently be structured a bit. Only if our flats could be built with a lock-out unit that can be separately rented out? There have been some attempts to do so but it generally does not appear to have proliferated. Every young family desires to buy their first home with the purpose of growing their humble home with children (and the provision for a maid?). But as the kids up grow, get wedding and re-locate, the real home begins to get emptier and hollow.
Instead of downgrading to a smaller home, wouldn’t it be nice if a part of maybe it’s locked off as a separate unit for rental, and hence provide a decent income stream for pension to complement their CPF? It would keep the older people involved also. The possibility of social interaction with their guest is also a possibility.
The regulatory regime has to capture up to allow accommodations, a la AirBnB (see AirBnB – Sharing a Home for Rental Income). Legalize it, so that the older folks can gain accommodations income from vacationers. Would this have the dual effect of promoting affordable tourism in Singapore as well? Accommodation with a different touch, a choice from the sterile hotels away. Of course, the concern has ended the launch of a criminal offense and sleaze if this is not maintained well. Some type of inspection and regulatory requirements could well provide the mitigation.
This stock portfolio may undershoot many investors risk appetite so it is often used with leverage. Inverse volatility weighting: Set weights of all assets equal to the inverse of their comparative volatility (notice that this is not the same as risk parity except for certain special instances, and it ignores correlations). This technique needs to be coupled with other methods if means or correlations are to be used. This profile might undershoot many traders risk appetite.
Minimum variance: Mean variance only using the covariance matrix (correlations and volatility), and with an objective function of minimum risk. This collection may undershoot many investors risk hunger. Maximum diversification. Does what it says on the tin. This profile may undershoot many traders risk appetite. HRP (hierarchical risk parity): As already discussed this is a hierarchical equivalent of risk parity, where we first group assets assign risk-parity weights within and across groupings then. I’ll discuss how this is solved in part two of this series.
- Developed Global Markets
- You don’t possess the slightest idea what’s going on
- Choose the money that best align with your targets and preferences
- Aggressive dating over the social spectrum
- Investing is easy, however, not easy
There is a third group of ideas which involves maximizing something else (Sharpe Ratio, geometric come back, higher occasions of the utility function); but these really lay outside the scope of what we’re considering here. Complex optimization techniques are extremely appealing to quantitative portfolio analysts and their managers. Humans have a tendency to presume that if something is complicated it must be appropriate sufficiently; and the more difficult it is, the better.
All of the techniques above are more robust than the stages two indicate variance optimisation and less likely to produce extreme weights. Not all the techniques shown appropriate properly for parameter uncertainty However. Used correctly the following methods are best at dealing with parameter uncertainty: overriding inputs, Bayesian boot-strapping, and optimisation. Risk parity, minimum inverse and variance volatility weighting do not use expected returns which will be the largest way to obtain uncertainty but do not deal with the uncertainty of correlation or standard deviation estimates.
But these methods also aren’t perfect. Non-parameteric boot-strapping does not deliver robust weights with limited levels of data always, though the benefit is had by it of requiring no additional parameters. On the other hand parametric boot-strapping requires one to select a proper distribution and estimate the parameters for this. A joint Gaussian distribution is insufficient for some financial data.