Friday, 1 March 2019

Taleb on black swan positioning

Bonds are bad investments because the potential upside is limited (interest payments) compared to the high potential downside (the debtor defaults).
Equities are better: the downside is limited (you lose all your money), but the upside is unlimited.

The problem is that the upsides and downsides will probably be priced so their risk-weighted returns are the same. Still, there's something in it. Given a bond and an equity with the same expected return, take the equity.

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