The risk/​return curve hides some important problems.
Many investors have more income when the stock market is high than when it is low.
For example, donations to MIRI are likely heavily influenced by the price of tech stocks and by cryptocurrency prices. MIRI needs to pay salaries that fluctuate much less than those prices. If MIRI invests in assets that have much correlation with those prices, MIRI will likely end up buying disproportionate amounts of those assets within a year after they peak, and buying less (sometimes even selling) within a year after they reach a low.
Maybe that works well for short-term market fluctuations, but whenever there are significant market fluctuations that last for several years, that would mean that MIRI would be buying mainly at the worst time. I expect that would cause them to underperform the relevant benchmark by at least a few percentage points.
So I expect MIRI will be better off minimizing the volatility of their investments.
Note that this conclusion holds even if MIRI is risk-neutral.
I expect that a fair number of individual investors have income fluctuations that imply the same conclusion.
The risk/​return curve hides some important problems.
Many investors have more income when the stock market is high than when it is low.
For example, donations to MIRI are likely heavily influenced by the price of tech stocks and by cryptocurrency prices. MIRI needs to pay salaries that fluctuate much less than those prices. If MIRI invests in assets that have much correlation with those prices, MIRI will likely end up buying disproportionate amounts of those assets within a year after they peak, and buying less (sometimes even selling) within a year after they reach a low.
Maybe that works well for short-term market fluctuations, but whenever there are significant market fluctuations that last for several years, that would mean that MIRI would be buying mainly at the worst time. I expect that would cause them to underperform the relevant benchmark by at least a few percentage points.
So I expect MIRI will be better off minimizing the volatility of their investments.
Note that this conclusion holds even if MIRI is risk-neutral.
I expect that a fair number of individual investors have income fluctuations that imply the same conclusion.