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A black swan event is a metaphor for a highly unpredictable event that can have a great impact.
It is based on a Latin expression that assumes that black swans did not exist before these unique birds were first found in 1697 in Australia.
After black swans were found, the meaning of the term changed and now means an unforeseen but high-impact event.
Here are the key takeaways from the book The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb.
Taleb talks about two hypothetical worlds, Mediocristan, which represents a stable world with predictable events, and Extremistan, which is shaped by rare events.
Many things happen without a precedent. Events like the 2008 financial crisis teach us to plan for things that may come without a warning.
Don’t depend on all financial forecasts and models as they don’t account for rare events that can have a massive impact.
The book suggests putting 85-90% of your money in safe investments and the remaining 10-15% in high-risk investments to strike a balance and create wealth.
Focus on building financial strategies that prepare for an uncertain future instead of relying just on past trends.
Build expertise in multiple areas and for various roles to be prepared for unpredictable events like layoffs and to grab life-changing opportunities.
Most financial strategies rely on averages. Take rare but impactful financial disruptions into account while planning your investments.
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