Asset Allocation As Seen in StarCraft

July 14th, 2010 by Potato

Asset allocation refers to how you split up your assets (i.e., money). To me, it’s an easy concept, but to others less so. Here’s an analogy to StarCraft I was going over with Netbug the other night:

Bonds/fixed income. This is your defensive stuff. The marines in your bunker aren’t going to get a whole lot of kills through the game, but they’re going to keep you protected. Even in an all-out assault, the enemy has to blow through the bunker before they can even touch the marines. It’s not a glamorous job, but it’s always wise to have a few marines on guard duty. As you get nearer the end game, and protecting what you’ve got becomes more important than getting more, it’s wise to shift more of your assets into defensive roles.

Equities. This is where your growth comes from. The expeditionary forces you send out to secure more expansion points. In the long run, you’ll expect to take a few lucrative vespene geysers with these forces, but any individual one could get surrounded and wiped out. Best to diversify by trying a few different expansion locations, rather than putting all your eggs into one basket. Early on, you’ll probably want to put most of your forces into these growth areas, since even if they do get wiped out you’ll have time on your side to make it back. Later on though you’re going to want to shift your focus away from growing more, and back to protecting what you’ve managed to grab.

Which brings us to rebalancing: if you have a good run of luck with your risky growth stuff, it may be wise to use some of those newfound resources to beef up your defense. Vice-versa, after a nasty market decline decimates your equity expansion task force, you’ll probably want to take a few goons off defense to bring you back up to your target allocation. Turtling up after a small setback on the expansion front is not the way to go in investing.

Your last category of asset allocation is what you’ve got in the bank. This mineral stockpile can be easily and quickly spent to buy what you need in the moment, and is an important buffer for your finances. But, it’s not earning anything for you sitting there, so you want to figure out what margin of safety you need (3 months of expenses is a good rule of thumb, or in SC terms, enough to get each of your production buildings going with one unit in the queue if you need to switch directions), and get the rest out there on the field working for you.

6 Responses to “Asset Allocation As Seen in StarCraft”

  1. Netbug Says:

    I was always the zergling rush followed by the mutalisk overrun.

    Then I ran into Potato’s science vessels.


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  4. Brian Says:

    Great stuff! Did you pre-order sc2 yet?

  5. Potato Says:

    Yep, but haven’t made much use of my beta code that came with the preorder.

  6. Marianne O Says:

    I don’t get this at all, but I’ve forwarded it to my boardgame-addicted husband who will. This might just be the opportunity to boost his interest in personal finance.