I don’t know whether I am a right person to answer this or not. But, I will try.
I recently came across with the idea of investing in the world of unknown and unknowable. That concept is basically a ‘emerging moat’. In this UU situation, basically no one knows what it will take to win this game or what it will take to lose.
So here I just built my little mental model to allocate capital in those situations.
Start thinking as of a positive black swan or negative black swan events (Black swan book), if you love the story of emerging moat or idea, start with the capital you are willing to lose 100%, say 2,3% of ones networth. Then going forward over time, after understanding the landscape, make the rough guesstimates of events. After sometime, we will be able to figure out the contigencies needed to happen in order to win or lose. And, if you do believe things are moving forward in right direction (for long term) with the right mindset and attitude, start increasing the bet. Bet big when the sky is little more clear. Basically over time, when odds of payoffs are humungous, we go for big.
Key readings: – Investing under UU situations by motilal oswal, Blue ocean strategy, Maxims of analytical thinking by Prof. Richard, Beat the dealer, Research paper by Prof. Richard for investing under UU situations.
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