Optimal Investing Strategy

This blog is about my search for the ultimate investing strategy - the one that, in theory, I could put on auto-pilot, and watch my wealth grow.  My inklings at the start of this journey was that Value Investing in equities would prove to be the ultimate investing strategy, and along the journey I would learn an optimal algorithmic implementation that I could automate.

I still believe this to be the case, however, today, I do not see much value in equities. More so, the most undervalued asset at the moment, appears to be gold.

But, the point I want to make in this post is the gaming meta-strategy: 

• Find the game with the highest expectation value.
• Play it in the optimal way.

 Finding the game with the highest expectational value incorporates a number of ideas:

• Expectation value is your likely statistical outcome - your forward looking average.
• Focus on measuring performance over the long term.
• Diversification mitigates risk, but sacrifices expectation value.
• Allocate all your time and resources validating the expectation value and playing the game optimally.
• Don't waste your time and resources on games that are sub-optimal.  

Playing the game in the optimal way:

• Allocating appropriate capital into the game to balance risk and reward
• Maximising returns.  

So, if I were to walk into a casino with the goal of making money, or perhaps, losing the least amount of money, I would seek to find the game with the highest expectation value (Black Jack in most casinos), and play it the optimal way.  Of course, 0% is still higher than any negative expectation value - so the best strategy is in fact not to play at all, until the odds are in your favour.  Also, if I were the casino, I'd focus my efforts on getting the most players (actually money) to the Keno and raffle style games.

Back to investing...

Along my journey, I had hoped to answer some niggling questions that I had about money, and in particular, on inflation - most notably - why does the RBA target 2-3% inflation?  This inevitably led to me read up on money, banking, credit, trade (in)balances, IMF, BIS, gold, etc, and I ended up at fofoa, and the gold transition play.

So, whilst I still consider myself a value investor, and plan to invest heavily in equities once value returns to the equity markets, right now, I'm a simple saver, squirreling my hard earned away for the future.