Better Balance

Miyagi: You remember lesson about balance?
Daniel LaRusso: Yeah.
Miyagi: Lesson not just karate only. Lesson for whole life. Whole life have balance...everything be better. Understand?
--The Karate Kid

As an investor, I used to bet on one macro scenario. Even if I reasoned that several outcomes were possible, I'd put all my chips on the one I thought most likely.

I've come to learn that isn't a good idea. My most likely scenario might not materialize. And even if it does, it might take much longer than expected. Meanwhile the underweighted scenarios dominate.

So now I spread it around. If I envision three possible scenarios, then I allocate capital more or less equally among those three. I might adjust them a bit based how I suspect things might unfold, but I retain material exposure to all of the possibilities.

Although I won't kill it if my preferred scenario happens to play out, my performance is more balanced.

I no longer worry about having to be exactly right in both direction and timing. And I sleep better.