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>It would be weirder, much weirder, if they kept a conflict list like a law firm modern portfolio theory (MPT) is the only acceptable measure of investment per

>It would be weirder, much weirder, if they kept a conflict list like a law firm modern portfolio theory (MPT) is the only acceptable measure of investment performance, and calculating co-variance is the salient feature of MPT, so no, it would not be weird to track overlap. to sum it up in a single sentence, is OpenAI a good investment for you at $50 a share? Without even knowing anything else about the company, if the rest of your portfolio is already 100% shares of OpenAI, or even AI companies, no, for you, probably this would not be a good investment: the market does not reward diversifiable risk.

tptacek 2y ago
At 5000 companies this is a little like saying that investors should avoid the S&P 500 because it includes both Coke and Pepsi.
- fsckboy 2y ago
  it's a good point you raise, you are definitely paying attentiong, but no, that's literally not the right interpretation of what it says. it says you should own both Coke and Pepsi instead of either one exclusively; you actually want Coke, Pepsi, and 7up and Polar and Canada Dry and/or Dr. Pepper and/or whatever else is an independent company. In what proportions should you own them? weighted by their market caps. but you also want to own every other company as well, weighted by their market cap. Wilshire 5000 >> S&P 500 The reason to avoid the S&P is not because it contains competitors, it's because it does not include 4500 other companies. But that aspect of investing is CAPM. Portfolio theory refers to your own portfolio. Never think "I made a great investment in Company X earlier this year." why? because what was the rest of your money in, you didn't put it all in X, did you? And what was your money in when it wasn't in X? You must always look at your entire portfolio, and you must always look all the time. Nobody cares if you won a hand of poker, the question is, how do you do on average and over time.

tptacek 2y ago

At 5000 companies this is a little like saying that investors should avoid the S&P 500 because it includes both Coke and Pepsi.

fsckboy 2y ago
it's a good point you raise, you are definitely paying attentiong, but no, that's literally not the right interpretation of what it says. it says you should own both Coke and Pepsi instead of either one exclusively; you actually want Coke, Pepsi, and 7up and Polar and Canada Dry and/or Dr. Pepper and/or whatever else is an independent company. In what proportions should you own them? weighted by their market caps. but you also want to own every other company as well, weighted by their market cap. Wilshire 5000 >> S&P 500 The reason to avoid the S&P is not because it contains competitors, it's because it does not include 4500 other companies. But that aspect of investing is CAPM. Portfolio theory refers to your own portfolio. Never think "I made a great investment in Company X earlier this year." why? because what was the rest of your money in, you didn't put it all in X, did you? And what was your money in when it wasn't in X? You must always look at your entire portfolio, and you must always look all the time. Nobody cares if you won a hand of poker, the question is, how do you do on average and over time.