The clue is that your portfolio of such investments should never comprise a position of 1 (as I said, position constraint is crucial).
Of course, no hindsight-based process would sensibly invest in anything that went to zero. But I don't have a crystal ball to apply a hindsight-based process.
If I offered you 200x your money if a dice rolls 6, but a complete wipeout on every other roll - would you take the bet? You should, it would net you an expected return of over 30%, over several bets. On most rolls however you'd lose everything (that you bet). So clearly, the key is to constrain your bet size.
The clue is that your portfolio of such investments should never...
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$1.24 |
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| No. | Vol. | Price($) |
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| $1.24 | 12688 | 9 |
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