In my opinion this Benjamin Graham is being stupid by comparing the optimal strategies for investment with the optimal strategies for a game that is rigged in favor of the house. In the latter, there is no question that putting one chip on every roulette square will inevitably result in failure. In the former, wise investors diversify by placing chips on as many winning squares as possible. This does not maximize return but it does cushion investors against making that one bad bet.
Stated another way: the two would be more comparable if roulette were a game where any given bet could either lose 100% or gain 125% of its value. Here a diversified betting strategy doesn't maximize your gains, but it does protect you from losing everything, which 99% of investors could not weather.
![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
syntheid
no subject
Date: 2012-10-01 06:33 pm (UTC)Stated another way: the two would be more comparable if roulette were a game where any given bet could either lose 100% or gain 125% of its value. Here a diversified betting strategy doesn't maximize your gains, but it does protect you from losing everything, which 99% of investors could not weather.