Investing discoveries are well documented through time and have led to many fundamental rules of investing. This include, although not limited to models that maximize return for a level of risk, the best asset classes to invest in, and what quantitative factors drive long-term success. Many principles have proven to work and can truly be touted as fundamental principles of investing. They can be understood much like a scientist who can observe specific biological principles in order to understand and improve life.
But have we found the all the fundamental ways to successfully invest? Are there undiscovered asset classes, new ways to diversify, or unseen risks yet to be found?
Nathan Wolfe presented a TED talk entitled, “What’s Left to Explore?”. He described the portion of biological matter (“20% of the genetic information in your nose doesn’t match anything that we’ve ever seen before”) that cannot be identified. The lesson being that we haven’t uncovered all the critical secrets or laws of biology. There remains so much to discover and those discoveries could unlock new ways to fend off viruses or other ways to improve human life. The same is sometimes inferred in investing, we get complacent with the principles we know, the formulas that have worked, and the risks that have played out.
I believe we haven’t finished discovering the best ways to invest in ways to build wealth, create jobs, provide income, and provide for the various institutional missions that exist. Although we can sometimes apply too much scientific rigor to investing and ignore the behavioral elements of human beings that make it difficult to predict, the “dark matter of investing” is critical to explore in order to achieve true long-term success.