Fate — noun
I asked ChatGPT, and it told me: "Financial risk is not a fate, but rather a choice."
Then it all depends on what risk is. Here are some scenarios.
| Event | Importance | Fate or choice |
|---|---|---|
| Asteroid destroying earth | Most extreme | Fate |
| Nuclear war destroying all assets | Most extreme | Fate, unless mad dictator |
| Confiscation of all private assets | Very extreme | Fate for almost all |
| Loosing pension | Extreme | Fate usually |
| War destroying most assets | Very extreme | Fate for almost all |
| 1929 style depression | Very extreme | Fate unless politician/regulator/financier |
| Major financial and economic recession | Extreme | Fate unless politician/regulator/financier |
| 2008 style crisis | Moderately bad | Fate unless politician/regulator/financier |
| Banking crisis | Moderately bad | Fate unless politician/regulator/financier |
| CDS | Not important | Fate for most |
| Value-at-risk | Not important | Fate for most |
| Volatility | Not important | Fate for most |
Like always, the answer is "It depends". At the risk of oversimplification, there are three types of people this applies to.
And the the rest is by far the largest group. An OECD study found that 40% of the population does not understand diversification, and only 27% are able to both calculate simple interest and recognise the added benefit of compounding over five years. Even for the 40% I surmise only a small fraction is familiar with the intricacies of risk management and asset selection.
@techreport{OECD2017, year=2017, author={{OECD}}, title={{G20/OECD INFE} report on adult financial literacy in g20 countries}, institution={{OECD}}, }