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The Sophisticated Investor Test
- robocat 2y agohttps://archive.ph/dytZs https://archive.ph/dytZs > I have proposed my own solution, which I call the “Certificate of Dumb Investment.” The idea is that anyone can go to the SEC and ask for the certificate, which says: I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money, and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony. I think the right answer is to limit the percentage of our wealth we can invest in something risky. A form of enforced diversification (which is as important for the middle class as it is for someone wealthy). Again and again we see people that have invested 100% of their equity into a "dumb" investment and lost it all. They would sign the dumb declaration as a proof that it is a valuable risky investment! Signing "I won't complain" doesn't protect, it helps protect against complaints of regret. We all should be able to invest in crazy investments, but ideally we have a method to help prevent the "dumb" from losing their houses to the smart financial vampires.