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4min chapter
Beware of Survivorship Bias When Investing
Money For the Rest of Us
The Importance of Protecting Against a Stock Market Disaster
In a recent paper, an economist looked at the cost of protecting against stock market losses greater than 15%, using put options to protect. He concluded that there was a 37% chance the US could have had an 80% or greater stock market crash, but it didn't. We measure risk not by volatility, but how would our lifestyle be impacted by a 60% crash in the stock market 70% referring back to Argentina back in 2019. The 4% rule is developed by Bill Bengan who published a piece in 1994 about safe withdrawal rates from defined contribution plans.
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