You buy the benchmarks using index ETFs and spread your money out across multiple asset classes, according to your tolerance for risk. Investment strategy buckets When the market veers in a given direction, you buy or sell from each bucket, accordingly. The only rule is to put your asset classes back into balance with regularity, and to keep cost minimized. Does this approach work? You bet it does.
Computer Simulation Suggests That The Best Investment Strategy Is A Random One
The benefit of that central bank strategy, the authors resource state, might be two-fold: From an individual point of view, agents would suffer less for asymmetric or insider information, due to the consciousness of a fog of uncertainty created by the random investments. From a systemic point of view, again the herding behavior would be consequently reduced and eventual bubbles would burst when they are still small and are less dangerous; thus, the entire financial system would be less prone to the speculativebehaviourof credible guru traders. The authors admit that they still have quite a bit of work to do in establishing a clear central banking policy utilizing a random investment scheme. And the strategy still hasnt been tried with real money. Still, its an interesting result that held true over a lot of different data points.