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There is no optimal ratio per se. You just divide gain by risk and maximize that quantity. This is a scale invariant function, at least, with respect to its max
by darawk 6y ago
There is no optimal ratio per se. You just divide gain by risk and maximize that quantity. This is a scale invariant function, at least, with respect to its maximum.
- lanstin 6y agoI think you must be omitting variables, or simply trying to maximize dollars or some other approximately ordered quantity rather than maximize subjective fulfillment in life.
- darawk 6y agoWhich variables are being omitted? Certainly there are other variables relevant to a quality life than money. But the rules apply to any utility function you might come up with. You want to maximize risk-adjusted return.