The most simplest and logical way to invest in any asset using historical data.

Two pertinent questions come to all of us .

* Is the price we are buying is justified ?

* What is the possible return and risk ?

Here I am focussing on equity . But the concept is universal and be applied to different assets . Liquidity and timeframe also plays a role in this.

Let us find the answers and practical ways to implement . Our purpose is to win in the investing game . So this defines our limitations for the risk we should take to remain in the investing game for a longer time . The more time you can remain in the game , the more wealth you can build . I am assuming that you are a player in the game not an spectator.

I am sharing you some practical example . You can devise on your own !

I think the maximum risk to a good quality stock can be calculated like this ( in terms of percentage . How much the stock crashed from its previous high during recent crash due to Corona in 2020. Let us say 50% . Let us say at present stock price is hovering around at a 30% discount from previous high . You can safely assume the risk as 20 % . You can further reduce the risk buy x quantity at this price and keep 2x qty to buy at 10% further slide. Or you can devise your own buying strategies to bring the cost average as low as possible. This can reduce the risk further . Diversifying in few more good stocks can even reduce the risk further. On the aspect of quant strategies for accumulation, I have done some work and still doing . Even you can go with a psychology " Buy only when selling stalls or sell only when buying stalls. Buy when a stock only when it starts rising after a fall and vice versa.

Investing is a game of going against common perception and to stay for a longer time in the game . Big reward is waiting on the way , but you can not guarantee the time it will arrive . So you have to book profits intermittently to reduce your risk and be ready for a bigger game ahead !