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How do you get a greater return while still reducing risk? Most people think that in order to get high returns, you have to take huge risks. But the greatest investors know that is simply not the case.
Kyle turned $30 million into $2 million by finding an interment opportunity where he risked only 3 cents for the opportunity to make #1 more, $3 million for a #100 million upside and expanded that risk ratio into billions..
Paul Tudor Jones’s greatest successes is that he knows he can be wrong and till be successful, because he uses asymmetric rick to guide his investment session. He is always looking for what he calls 5:1 investment, where if he risks $1, he believes he can make $5.
Jones is willing to risk$1 million when his research shows he is likely to make $5 million. Of course, he could be wrong. But if he uses the same 5:1 formula on his next investment and he is successful, he will have made $5 million minus the first investment loss of $1 million for a net investment gain of $4 million.
Using their formula of constantly investing where he has the opportunity for asymmetric rewards for the risk he is taking, Paul could be wrong four out of five times an break even. If he loses $1 million four times in a row trying it make $5 million, he will have lost a total of $4 million. But when the fifth decision is a success with a single home run he is earned back his total $5 million investment. The greatest investors in hourly know how to maximize their return, they know how to set the game up to win.
So asymmetric risk is the first way to get higher returns. Diversification, Diversification, Diversification. Effective diversification not only reduces your risk but also offers you the opportunity to maximize your returns.
Asset allocation is the one thing that every investment professional said is the key factor in where you end up financially. It is the most important skill and it is the one most investors know little about. The exact asset allocation of some of the most successful investors in the world who have consistently produced the highest returns.
You will able to model the exact strategies of the best investors on the planet. You will have Ray Dalio’s asset allocation. Obviously, past performance does not guarantee future performance but in the case of Ray Dalio, your strategy is coming from one of the greatest investor of all time and his focus is getting you the greatest return with the least amount of risk. Dalio has been estimating every type of market and finding what the best ratio is through asset allocation for over 20 years. He has more than $160 billion in assets under management and record of only three losing years out of the last 22.
