The Question Most Investors Never Ask

Before chasing the next hot sector, ask this: how much of its future returns have already been used up? A framework inspired by Shankar Sharma's "Lake of Returns" offers an answer.

The Lake of Returns Theory (LORT), as proposed by Shankar Shama, is an elegant metaphor. But a metaphor is only useful if it can be measured. The question of how full or empty any sector’s lake actually is requires looking at several signals in combination. While he has claimed this is proprietary, it forced me to think about it recently. Below are some of my thoughts.