Trading Ideas
What is the 80-20 Rule?
The 80-20 rule is something many people recognize in their everyday life, but not always consciously. What is the 80-20 rule? Officially known as the Pareto Principle, it’s an aphorism that’s often used to describe the lopsidedness of input-output forces. It’s named after Italian economist Vilfredo Pareto, who, in 1896, observed that 80% of Italy’s wealth belonged to 20% of the population.
Since his original observation, Pareto’s principle has become part of everyday life. For investors specifically, knowledge of the 80-20 rule can help you better-understand your portfolio’s performance. More than that, it’ll help you make smarter investments. Here’s a look …read more […]