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

Sponsors

NetSuite 

Delete Me – Use code David20 to get 20% off

Insiders Guide Email Newsletter

Get our free Investors' Checklist when you sign up for the free Money for the Rest of Us email newsletter

Our Premium Products

Asset Camp

Money for the Rest of Us Plus

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

See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.