Re: for long term investments, why not go 100% emerging markets?
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2) that the best portfolio in the long run "usually" won't be one that maximizes your sharpe ratio
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the point i was trying to make was that if you start building your portfolio with the primary goal of diversifying fully and maximizing your sharpe ratio, expecting that you can then leverage it to meet your return goals, you might end up disappointed because leverage can be hard to obtain/implement.
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in every case i can think of (so likely almost every case) you know your constraints before yous tart building your portfolio.
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in a lot of cases it might be a lot more feasible to build your portfolio concentrating more on the riskier assets, as suggested in the OP.
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that is true, and if you don't have leverage, you can have an equity/EM heavy portfolio. but you should still diversify away from those two riskier & higher returning holdings
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there might be cases where you can only assemble an "optimal" portfolio expecting to return 7-8% using your method because the leverage isn't accessible, while you could expect to earn 10-12% concentrating on riskier assets with a slightly lower sharpe ratio. if you're on a 20-30+ year time horizon, you'd probably be better off with the latter.
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as you mentioned that is feasible, but just sticking everything in 1 or 2 asset classes isn't a good idea (which is what i was initially responding to)
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how's the portfolio you discussed a few months ago coming along? how are you obtaining your leverage?
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i don't have one ofthose yet. i invested my money before i knew about this in illiquid-yet high returning- investments (i.e. some undeveloped land at below market rate in auctions, very high end real estate at great prices-even at todays levels, and a few private companies).
my friend from my old job however, does have the portfolio (or an equity heavy version of it) and it is doing well. the leveraged bonds (from interactive brokers) have done great in this tumultuous period.
Barron
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