When You Don’t Know What to Do

Things done well and with a care, exempt themselves from fear.

—William Shakespeare

Uncertainties can paralyze decision-making, or, even worse, compel investors to base their actions on gut feelings and little else. Uncertainty and fear can’t be analyzed away. You are not trying to develop the best solution to one or even two events for your portfolio, but a good solution to many events. Then adapt as things develop over time. Using the simulation method, you balance simplicity and relevance by considering a likely set of events and the reaction to them by your managers, plus a likely set of outlier events and your possible responses to them. Experience and an understanding of the managers’ histories ...

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