Re:GameStop Is Rage Against the Financial Machine
by dragonwriter on Wednesday January 27, 2021 @07:01PM
(#25935983)
> You can't just reduce risk without also reducing gains.
You can (assuming you haven’t exhausted all available independent investment opportunities with equivalent risk/reward profile) reduce risk without reducing expected gains.
Doing so (assuming you were investing suboptimally for your the prior risk level and expected returns) involves reducing in the part of the distribution above the mean offsetting the increase in the part below the mean.
Buying a 10% interest in each of 10 lottery tickets (ignoring practical risks associated with deals to split winnings) doesn't reduce your gains compared to buying one lottery ticket, it just reduces your risk.
You can (assuming you haven’t exhausted all available independent investment opportunities with equivalent risk/reward profile) reduce risk without reducing expected gains.
Doing so (assuming you were investing suboptimally for your the prior risk level and expected returns) involves reducing in the part of the distribution above the mean offsetting the increase in the part below the mean.
Buying a 10% interest in each of 10 lottery tickets (ignoring practical risks associated with deals to split winnings) doesn't reduce your gains compared to buying one lottery ticket, it just reduces your risk.
This is the whole point of diversification.