Regret Minimization. A Smarter Way to Think About AI, Bubbles, and Portfolio Decisions

“Is there a bubble in AI stocks? Maybe. But that’s not the most important question.” Matthew Kadnar, CFA shares a behavioral framework he learned early in his career at GMO that still shapes how we think about portfolio decisions today: “regret minimization.”

Rather than asking, “What’s the perfect call?”, regret minimization asks a more practical question: How do you size an investment so you’re not crushed if it goes down, and not sick to your stomach if it keeps going up?

In periods of extreme uncertainty like today, decision-making matters more than predictions. This framework helps address the real risks investors face, including FOMO, framing, career risk, and the simple fact that we’re human.

Calling tops misses the point. What matters is having a process you can live with when you’re wrong.