What are the key components of the rational portfolio?
If I have made my point that you don’t have an edge you might feel a little disheartened. What is the point of investing without an edge? You might feel like doing nothing is the best option now, but then you will definitely not get a return on your money.
But there is a better way of investing your money – what we call rational investing – where we make your lack of edge a strength. Figure 3.1 shows a list of issues that a rational investor needs to think about, and this chapter will outline for you which asset classes go in to the rational portfolio, and how you can combine these to tailor the portfolio to suit your risk profile. The two main classes are the minimal risk ...