What Is Tail Risk and Are You Taking Too Much Of It?

When should you protect against rare, but extreme events? When should you self-insure? Under what circumstance should you sell tail risk protection to others?Topics covered include:How tail events differ from tail riskWhy volatility is not the best measure of risk for individualsWhat does it cost to protect against large stock market lossesWhy younger investors can take more risk due to their human capitalHow does the profit wheel options strategy workHow the catastrophic power outage in Texas exemplifies tail riskWhy individuals need to build more reserves because the economic system is too efficient and vulnerable to breakdownsThanks to SmartAsset and Babbel for sponsoring the episode. Use code DAVID for Babbel to get three months free.For more information on this episode click here.Show NotesAverage Weather in San Antonio Texas, United States—Weather SparkUpdate on the CBOE BuyWrite and PutWrite Option Indexes, October 2018—Asset Consulting GroupThe Texas Freeze: Why the Power Grid Failed Katherine Blunt and Russell Gold—The Wall Street JournalHis Lights Stayed on During Texas’ Storm. Now He Owes $16,752 by Giulia McDonnell Nieto del Rio, Nicholas Bogel-Burroughs, and Ivan Penn—The New York TimesWhen More Is Not Better: Overcoming America’s Obsession with Economic Efficiency by Roger L. MartinRelated Episodes250: Investing Rule One—Avoid Ruin283: Why You Should Care About Carry Trades321: How to Analyze Complex Investments323: The Economy Is Not A MachineSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

What this episode covers

When should you protect against rare, but extreme events? When should you self-insure? Under what circumstance should you sell tail risk protection to others?Topics covered include:How tail events differ from tail riskWhy volatility is not the best measure of risk for individualsWhat does it cost to protect against large stock market lossesWhy younger investors can take more risk due to their human capitalHow does the profit wheel options strategy workHow the catastrophic power outage in Texas exemplifies tail riskWhy individuals need to build more reserves because the economic system is too efficient and vulnerable to breakdownsThanks to SmartAsset and Babbel for sponsoring the episode. Use code DAVID for Babbel to get three months free.For more information on this episode click here.Show NotesAverage Weather in San Antonio Texas, United States—Weather SparkUpdate on the CBOE BuyWrite and PutWrite Option Indexes, October 2018—Asset Consulting GroupThe Texas Freeze: Why the Power Grid Failed Katherine Blunt and Russell Gold—The Wall Street JournalHis Lights Stayed on During Texas’ Storm. Now He Owes $16,752 by Giulia McDonnell Nieto del Rio, Nicholas Bogel-Burroughs, and Ivan Penn—The New York TimesWhen More Is Not Better: Overcoming America’s Obsession with Economic Efficiency by Roger L. MartinRelated Episodes250: Investing Rule One—Avoid Ruin283: Why You Should Care About Carry Trades321: How to Analyze Complex Investments323: The Economy Is Not A Machine See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.