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How to determine the optimial risk levels?
Posted: Mon Jul 04, 2011 11:58 pm
by oem7110
As we know, if we loss 20% of capital, it required 25% gained to recover the loss, does anyone have any suggestions on how to determine the optimial risk levels for portifolio? which level is more sustainable for mid term investment.
Thanks in advance for any suggestions
Risk | Gain for Recovered Lose
5% | 5%
10% | 11%
15% | 18%
20% | 25%
25% | 33%
30% | 43%
35% | 54%
40% | 67%
45% | 82%
50% | 100%
Posted: Tue Jul 05, 2011 3:10 am
by rhc
. . . does anyone have any suggestions on how to determine the optimial risk levels for portifolio
Ed Seykota, on his website discusses the topic of risk and calculates the optimal risk for a coin toss game with various payoffs.
Perhaps you can find some useful information there.
Here is the link;
http://www.seykota.com/tribe/risk/index.htm
Re: How to determine the optimial risk levels?
Posted: Tue Jul 05, 2011 4:52 am
by stopsareforwimps
oem7110 wrote:...does anyone have any suggestions on how to determine the optimial risk levels for portifolio? ...
Ralph Vince covers this topic in considerable detail - with a fair bit of mathematics - in his books. I don't think you can get around the need for math in this area.
I liked this one best:
"The Handbook of Portfolio Mathematics: Formulas for Optimal Allocation & Leverage" by Ralph Vince.
They mostly all cover similar ground. I think he has a draft version somewhere for free download. He is a very creative thinker though a bit messy.
Posted: Tue Jul 05, 2011 9:57 pm
by fab1usa1
I would suggest Van Tharp's "Definitive Guide to Position Sizing".