Equity returns are different in nature in different contexts and opportunities in markets.
Typically returns are multiplicative in nature. Very frequently it’s not additive/asymmetric returns. These are situations where market presents rarely but can be rewarding. In concentrated portfolios, Asymmetry returns do arise.
Probability plays an important role in the portfolio. for example, if out of 10 stocks, 5 stocks lose 50 % and 5 stocks gain 50% your net value with a base of 100 will be 125.
Therefore, it’s always prudent to focus on multiplicative returns.
Add comment