Some highlights / takeaways / thoughts / comments from #RWRI 14, Day 9:
1. It took us decades to figure out that trans fats were harmful. GMOs can have the same problem.
Just because we don't have evidence of a problem does not mean that there is no problem.
1. It took us decades to figure out that trans fats were harmful. GMOs can have the same problem.
Just because we don't have evidence of a problem does not mean that there is no problem.
2. When implementing a tail risk hedge strategy (whether in finance or other domains), your goal is to be at a point where you are okay with your worst case scenario.
3. Finance vs. Engineering.
In finance, tail risk hedging is often scorned. In engineering, tail risk hedging is the entire point (i.e. you are ensuring your bridge won't collapse).
In finance, tail risk hedging is often scorned. In engineering, tail risk hedging is the entire point (i.e. you are ensuring your bridge won't collapse).
In finance, portfolios are built to live most of the time. In engineering, projects are built to live all of the time.
4. The more you outperform, the more you'll be considered an intelligent investor, even if you're just hiding risk.
Is it more likely that an outperforming investor is truly that much better, or that they are hiding risks that just haven't been exposed yet?
Is it more likely that an outperforming investor is truly that much better, or that they are hiding risks that just haven't been exposed yet?
5. Volatility does NOT equal tail risk. Many in finance assume volatility = risk, but this is not true.
6. Compare two portfolios:
A has lower median return with no risk of ruin
B has higher median return with small risk of ruin
A is the only portfolio out of the two that will survive long-term.
A has lower median return with no risk of ruin
B has higher median return with small risk of ruin
A is the only portfolio out of the two that will survive long-term.
