In 2020, risk shifted from investment theory into everyday life.
When the pandemic struck, risk turned physical for investors. Stock market losses coincided with mass unemployment and business failures. Exogenous shocks often occur twice per decade but are fundamentally unpredictable. As serious as Covid-19 has been, exogenous shocks can be more detrimental and long lasting.
Finding Income Today
Finding income is difficult, which can tempt reaching for higher yield. This is risky, as such investments can become illiquid, or hard to sell, during a crisis.
Conservative investors will, therefore, continue to hold equities for growth and dividends.
But equity losses can be disastrous if there are no other sources of income available or a lack of time to rebuild.
Understand TruX and our approach
Managing Risk
Typically, risks are managed with insurance, diversification or guarantees. But certain risks break through these safeguards because of their nature to overwhelm. Examples include financial contagions, shortages in vital commodities, pandemics, social unrest, terrorism and cyber-attacks on infrastructure. Most have viral properties and can spread rapidly through a globalized system.
These societal shocks have huge consequences, are historically common and can be of any size.
New solutions are needed to face these risks we call non-normal, viral or exogenous.
Learn more about exogenous shocks