- June 13, 2021
- Posted by: NextLevel Education
- Category: Blog
1) You’re much more likely to be killed in a car accident than by a shark attack while swimming in the ocean.
2)The 1975 movie Jaws, a film about a man-eating shark caused a sharp drop in sea swimmers in California.
3)The frightened Californians were getting affected by something known as the availability bias
4) Where people irrationally ignore known facts and pay attention to information that makes the biggest impression on them is what affects them
5) So what makes an impression? Something what everyone talks about, something what is seen on TV and other media
6) Hence while we all fear Market Risk nobody fears Reinvestment Risk, Liquidity Risk, Credit Risk etc
7) This is simply because nobody discusses Reinvestment Risk; it is never spoken about in Media
8) Reinvestment Risk is associated with Government backed PPF and therefore is not seen as bad
9) Reinvestment Risk is slow poison and hence is easily brushed under the carpet
10) Market Risk on the other hand is sudden, associated with Equities, discussed on TV and other media
11) Clearly Market Risk is most dreaded even through Market Risk cause less long term harm than say Credit Risk, Reinvented Risk, Liquidity Risk, Interest Rate Risk
12) Liquidity Risk is the biggest ever Risk. Homes that people perceive worth 4 cr. can go unsold for several years at a stretch while assets affected by Markets go down and spring back over time