John Cameron's personal blog

Serious discussion about your financial position now - and in the future.

Who Spotted The Recent Black Swan Event?

Black Swan Events are things that happen, but nobody sees them coming. Mostly the term relates to events in the financial world, where markets change suddenly, without apparent warning. Examples include the GFC, and the 1987 sharemarket crash.

Black Swan events can also occur in our personal lives, such as when a close family member is struck down by a sudden illness, out of the blue and with no warning. A current example is diver Taneka Kovchenko, who had to withdraw from the Commonwealth Games because of a medical diagnosis that “one dive gone wrong could turn her into a paraplegic”.

Then there is the example of Tim Paine. Who, 12 months ago would have tipped him to be Australia’s captain? He had a record as an outstanding wicketkeeper, but his career was hampered by serious injury (a broken finger that took several surgeries to heal), and at the start of the season he was playing for Tasmania as a batsman, and seemed to be on the way out of first class cricket.

Then, out of the blue, he gets picked as wicketkeeper. Now, six months later, he is Australian captain.

The moral of these stories is simple: Predicting or forecasting the future is extremely difficult, and things can suddenly change for no apparent reason (although, after the event, and with the benefit of hindsight, it all seemed “oh so obvious”). Bad luck we don’t have the benefit of hindsight beforehand! Or, as the old saying goes “looking back, we all have 20/20 vision”

What does all this mean for running our financial lives?

By definition, there is nothing we can do to prevent Black Swan Events.

However, we can recognise that they exist, and allow for them by providing a safety buffer in our portfolios. These can then be our source of funds while things are rearranged and re-sorted.


John Cameron is one of the best qualified, most experienced, respected financial planners in Australia - Call now, for a no-cost consult. (08) 9322 7818


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