The importance of long volatility and owning convexity in investment strategy

Understanding the significance of long volatility and owning convexity in investment strategy can lead to better returns, as demonstrated by the example of S&P compounding over 40 years. Missing the 10 best months reduced the total return significantly, while missing the 10 worst months resulted in an even greater impact on returns. This challenges the traditional financial approach of focusing on the expected center of the outcome and ignoring the extreme percentile wings. In the current economic climate, there is a growing concern about the risk of stagflation during a recession, which could lead to a challenging financial landscape.

Transcript

Play full episode

Transcript

Episode notes

Remember Everything You Learn from Podcasts

Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.