Navigating Uncertain Rewards and Certain Risks

October 2, 2017
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Great White Swami'sPhoto source: Gary Elliot, San Diego Union Tribune

My latest Research magazine column is now available online. Here’s a taste.

September 1, 2011, was a beautiful day. Photographer Gary Elliot was taking pictures at Swami’s, a popular surfing beach in Encinitas, California. The surf was high that day, but nothing else seemed out of the ordinary.

When reviewing his photographs later, Elliot noticed a large shark fin in a cresting wave near several surfers. There had been no reports of sharks. As confirmed later by experts, the size and shape of the fin indicated a great white shark, about 12 feet long and weighing roughly 1,000 pounds.

This remarkable happenstance is a powerful metaphor for investing in stocks. Equity investing offers uncertain rewards but certain risks, no matter how beautiful the weather or how calm the seas. These risks are often opaque to us. There is no way to know if and when those risks will bite and what the extent of the damage will be.

I hope you will read the column (and the issue) in full.

Navigating Uncertain Rewards and Certain Risks

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