American economist, trader and the author of the book “Black Swan. Under the Sign of Unpredictability” has announced that when he is considering to invest in certain projects, he always relies on crises.
“I’m not trying to get a return similar to the market. I’m betting on crises. Global crises happen once in about 10 years. And between crises, I enjoy life. All I need is one crisis in 20 years.” – Taleb shared his experience.
According to Nassim Taleb, he buys several shares at once during the crisis, because he can “afford it”. “The only advice I give to an ordinary investor is to keep in reserve the amount of money that can be invested during a crisis when others cannot do it,” the trader stressed.
The author of the “Black Swan” theory also named the following rules, which, in his opinion, should be followed by an individual investor:
1. low level of borrowed funds or its complete absence;
2. a series of transactions with a low risk of catastrophic outcome;
3. a lot of speculative rates, one of which will bring a significant income;
4. availability of cash, protected from inflation;
“<…> and for the remaining 20–30% of the portfolio, take as much risk as you like, depending on the appetite for it,” the expert concluded.
Nassim Taleb became famous for his book “The Black Swan. Under the Sign of Unpredictability”, published in 2007. According to the theory of the author, almost all events that are relevant to markets, international politics and people’s lives are completely unpredictable. As a result, traditional risk management, which methods are used by government agencies and companies, is useless.
Taleb’s theory became popular in the wake of the 2008 financial crisis. The Economist is also known as the author of Dynamic Hedging, Fooled by Accident and Anti Fragility. How to Benefit from Chaos.
In 2015, Taleb together with his partners founded the non-profit institution Real World Risk Institute. It is engaged in the development of new risk management techniques.