In today’s post, I discuss a few paradoxes I have discovered over time. At the end, I provide an example of the largest stock in my portfolio and explain how these concepts apply to it. Unfortunately, I have never learnt them at university or while studying for the CFA exams.
Solutions to those riddles provide the key to building the best stock portfolio. They are based on such simple maths concepts that many of us just ignore.
When you look for a car to win in a race, do you look for the fastest car? Do you look for the stock with the highest upside to add to your portfolio? When gambling, do you go for the bet with the highest expected value? As unexpected as it may sound, “Absolutely, yes!” is the wrong answer to all these questions.