4 tips on surviving Black Swan events!

skrimon · November 14, 2022

In light of recent developments, we figured now would be a good time to review some of the best ways to prepare for and deal with Black Swan events, both as a trader and as a person. Although the recent bankruptcy of a large cryptocurrency exchange is the most recent example of a Black Swan, there are Black Swans in all walks of life, from the personal to the political to the environmental. Therefore, we'll give you a hand by discussing some tips for protecting your future from unexpected disasters.

1) Don't keep all your eggs in the same basket. 🪺

Spreading your assets across multiple custody providers is a great way to protect yourself in case any of your providers run into financial trouble, as we have seen with FTX recently. That way, you never have to worry about the dangers of relying on just one service. While many governments around the world have taken measures to address this issue (such as FDIC insurance and increased financial regulation), ultimately, no one will protect your interests as well as you will. Verify that you're in a favorable position.

You should diversify your holdings across asset categories and geographies. Do you have a sizable holding in a single geographic lot? You are suddenly vulnerable to the effects of climate change, political upheaval, and other potential hazards. Own only one type of investment property? Perhaps the macro situation has suddenly shifted against you, and the value of your assets is much lower than you previously believed.

Diversification, both in terms of position and total risk, is the name of the game. What parts of your defenses are weak?

2) Keep some cash on hand 💵

Having cash on hand to cover short-term expenses is a lifesaver in case you ever need it; this is especially true for those who are currently unable to access their funds due to the recent turmoil. Some people would consider being laid off to be a personal black swan event because it could put a person's financial stability back years. It's important to put yourself in a position where you won't go broke if something out of the ordinary disrupts your daily routine.

3) Carry no liabilities 🏦

It's true that there are times when borrowing money is unavoidable, but in times of crisis, those who have no monetary ties to anyone else are in the best position to weather the storm. Having liabilities can cause undue additional stress, which eliminates options for people who would otherwise be able to take advantage of the conditions, given that most Black Swans cause all sorts of financial damage to their victims. When disaster strikes, those with the most financial resources are often the ones who can benefit the most, acquiring assets at bargain basement prices. Debt can limit your ability to respond quickly to changing circumstances, so avoiding it is a good risk-management strategy.

4) Keep some assets on hand, in person. 🪙

This piece of advice is for larger, more systemic black swan events, such as prolonged power outages, communications network failures, meteor strikes, war, and so on.

Having assets on hand, however, is the best thing you can do for yourself in the event of a wider regional or global societal collapse. Having a backup at your residence is the ultimate safety net in the event that you are cut off from the larger social infrastructure to which we all contribute. You shouldn't be caught without a strategy when it comes to money, gold, seeds, or food.

We know this isn't the most pleasant subject, but if you follow these tips, you'll be much better prepared for the many dangers and difficulties this world has to offer.

Don't risk your safety.

I appreciate you taking the time to read this. Leave a comment below if you need clarification. I'll respond to your inquiry.