“The obscure we see eventually. The completely obvious, it seems, takes longer.”
—Edward R. Murrow, American broadcast journalist
When Harry Markowitz, winner of the 1990 Nobel Prize in Economics for his portfolio management theory, was asked how he allocated his investments, he replied, “I should have computed the historical covariances of the asset classes and drawn an efficient frontier... Instead, I split my contributions 50/50 between bonds and equities.” Everyone has probably experienced this phenomenon whereby you analyze—maybe even use—sophisticated models to evaluate business challenges or opportunities but rarely apply the same amount of time, effort, or diligence to your personal finances or endeavors.
This paradoxical ...