Are You Taking Enough Aspirational Risk?

Are You Taking Enough Aspirational Risk?

Why we need distinct risk buckets: balancing our natural loss aversion with the allure of opportunities that offer the potential for massive upside.

Topics covered include:

  • What is modern portfolio theory, and what are some of its flaws
  • Why so many people have gotten wealthy by being undiversified
  • How to balance personal risk, market risk, and aspirational risk
  • How prospect theory explains our attraction to positively skewed opportunities
  • Why most people won't get wealthy unless they take some aspirational risk


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Show Notes

Portfolio Selection by Harry Markowitz—The Journal of Finance, Vol. 7, No. 1. (Mar., 1952), pp. 77-91

Safety First and the Holding of Assets by A. D. Roy—Econometrica, Vol. 20, No. 3 (Jul., 1952), pp. 431-449

The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot and Richard L. Hudson—Hachette Book Group

Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors by Ashvin B. Chhabra—The Journal of Wealth Managment, Vol. 7, No. 4, pp 8-34, Spring 2005

The Wealth of Households: 2021: Current Population Reports by Briana Sullivan, Donald Hays, and Neil Bennett—Census.gov

Average, Median, Top 1%, and all United States Net Worth Percentiles—DQYDJ

PROSPECT THEORY AND STOCK MARKET ANOMALIES by Nicholas C. Barberis, Lawrence J. Jin, and Baolian Wang—NBER WORKING PAPER SERIES

Related Episodes

82: Unlocking the Power of Positive Skewness: Strategies for Investing, Business, and Creativity

460: Should You Be Invested 100% in Stocks Before and During Retirement? A Recent Study Says Yes.

421: Beware of Survivorship Bias When Investing

Investing Rule One: Avoid Ruin

229: Stop Maximizing Your Returns Using Modern Portfolio Theory


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