Black Swan Protection Protocol is an investing theory pioneered by Nassim Taleb to protect your portfolio in case of very low probability high impact events identified as Black Swan events. Those events while low in probability have major impact on performance and risk. Implementing a black swan protection strategy allows the following benefits:
- Ensuring you portfolio is protected in case of major drop:
While investment horizons can be long terms no one knows what life has in store for us. having a Black Swan Protection allows you to protect you investment in case of a need of liquidity during a Black Swan event avoiding having to liquidate at a bad moment or not having enough liquidity.
- Higher long term return:
From March 2008 to Dec 2024 the combined portfolio of Black Swan Protection Strategy & S&P has outperformed the S&P by an annualized return of 3.3% with a return of 14.7% vs 11.4%. Notably, during the 2008 financial crisis, BSPP delivered a 55% net payoff of protection size while the market crashed. - Sticking to long-term strategy:
This is one advantage of defensive strategies in general and black swan investing in particular. It allows investor to be more confident investing while not being worried about a black swan event which protects investors from emotional investing as they can keep their heads even when the market is crashing. - Deploying cash during downturns:
Most investors want to sit on their cash during market downturns. But market bottoms often provide an opportunity to snatch up great stocks at a discount on their intrinsic value.
For more insights, explore our blog posts:
Black Swan Investing: How to Protect Your Wealth Against Unpredictable Market Crashes
Protect Your Portfolio: The Right Way to Balance Diversification and Black Swan Investing