Perfect diversification means no asset can be dropped from (rather than added to) a portfolio

A common belief: adding extra asset to a portfolio will automatically reduce the portfolio risk. We provide a counter-example resorting only to the simplest algebra and explain why this erroneous belief is so common. 

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Numeracy for Traders – Lesson 2 – Exponentiation, polynomials, logarithms and the power of compound returns

Native Americans could have bought Manhattan back if invested 30 dollars by 6% CAGRAfter this lesson you will understand how to compute the compound return, discount factors and the CAGR (compound annual growth rate: nominal and inflation adjusted). You will also learn about the continuously compounded (exponential) interest and logarithmic returns. Finally, you will be able to calculate the effective rate of interest of a credit or of a savings scheme.

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The Maximum Drawdown succinctly explained in 3 minutes

The maximum drawdown (MDD) is likely the most important measure of risk in practice. We explain how to calculate it and why you should keep it under control.  Remember, if the MMD reaches -50% the portfolio have to grow +100% in order just to compensate the previous loss!


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Numeracy for Traders- Lesson 1 – Fractions

Fractions is a topic from elementary mathematics but surprisingly even some Ph.Ds in math have problems with them. After this lesson you will be able to read pie diagrams, calculate portfolio weights and weighted average returns. This lesson does not substitute systematic learning but helps you to recall fractions and demonstrates their usage in trading context.

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