At finccam, we apply Occam’s principle of parsimony to questions of relevance to the financial industry resulting in an investment management approach focused on what is most important (“puristic investing”).
William of Occam was a medieval philosopher and theologian. Today, he is most remembered for the development of Occam’s Razor, which is also known as the principle of parsimony. This principle says that if there are several equivalent theories for any phenomenon, the simplest option is usually correct. A theory, in this context, is considered simple if it consists only of a few variables and has hypotheses that are linked in a clearly logical way.
Applied to investing, the principle of parsimony helps to focus on the most essential elements. Using Occam’s Razor, we avoid unnecessary and non-valuable complexity. The drivers of value and the risk of an investment are questioned consistently and reduced to the fundamentals.
The avoidance of unnecessary complexity, as well as a focus on the fundamental success factors of an investment and their interaction in the context of portfolio allocation, are of primary importance at finccam.
The goal is to identify substantial risk premia in the growing universe of investment strategies, to measure the associated risks and then to manage them effectively, as well as to choose an efficient implementation. On this basis, it is possible to achieve strong returns while taking only justifiable risks.