What are the key components of the rational portfolio?
Once you have conceded that you don’t have an edge on the market, unfortunately you are not done. In fact you have only arrived at the starting point of your rational journey!
Doing nothing with our assets is not a sensible solution: we need to put our money to use to get the best return for the risk we take, just like we would if we claimed we had an edge. Figure 3.1 shows a list of issues that a rational investor needs to think about. The remainder of this book covers these issues.
Figure 3.1 Issues that the rational investor must take into account