ReSolve's Masterclass

In episode one we described an investment arena that is likely to provide the best long-term opportunities. On this second day, we lay out the case for giving as much (or more) credence to portfolio diversification opportunities as is given to a strategy’s investment edge. We believe investors should always seek the highest compensation for the risks they are willing to incur. In other words, their objective should be, as much as possible, to get the most bang (return) for their buck (risk). It can be useful to think of this risk-adjust return (or Sharpe Ratio) as a function of (1) an investor’s skill in generating consistent returns and (2) the amount of true diversification available in the investment universe at their disposal. We believe this second point is the most widely-overlooked aspect of portfolio construction, and we seek to remedy this today.

Reference: https://investresolve.com/blog/the-case-for-tactical-alpha-part-1-the-fundamental-law-of-active-management/

https://investresolve.com/blog/the-case-for-tactical-alpha-part-2-the-fundamental-flaw-of-grinolds-fundamental-law/

https://investresolve.com/blog/the-case-for-tactical-alpha-part-3-the-greatest-trick-wall-street-ever-pulled/

On the first day of this series, we answer a pivotal question that every investor should ask themselves before embarking on their investment journey: where should you dedicate most of your energy and focus, asset allocation or security selection? We review how the biggest impact to portfolios comes from asset classes rather than individual securities. We also expand on how the largest pools of capital may lack the portfolio agility and mandate flexibility to take full advantage of the excess returns available in the asset allocation arena. This reality tends to generate better and more sustainable long-term opportunities for smaller, unconstrained players to deploy nimble and adaptive investment strategies.