Investable Methodology
Our Methodology
Investable calculates an aggregate return using the average return of a member's investment ideas over a given period.
Methodology Principles and Assumptions
- At any one time the size of a member's investment ideas are equally weighted
- The size of the investment is irrelevant
- Operates using "percentage rates of return" and not "market or portfolio dollar values"
- Investment returns are "scale free" (applies "constant-returns-to-scale")
- Exhibits "time-weighted rates of return"
Reasons for Methodology
- We believe average returns convey more insight into value creation ("excess return" or "alpha" generation)
- We believe average returns compensate more effectively for outliers
- We believe average returns are easier to compare across multiple observations
- We believe applying average returns is more efficient for members than complete portfolio tracking
- We believe that "security selection" is easy to replicate and "portfolio sizing" is not
- We believe the "investment decision" is more important than the "sizing decision"
- We believe the investment sizing decision ultimately resides with the end investor
- We believe that performance metrics based on average returns are more useful to all financial market participants