From the NBA "Morey incident", talk about the systematic risk of investment
1. What is systemic risk
In my previous article, I have analyzed the systematic risk in investment and how to avoid it.
The so-called systematic risk means that when a risk occurs, all varieties in an investment field will not be spared and will be wiped out.
For example, the stock market, whether it is the Chinese stock market, the U.S. stock market or the European stock market, reflects the operating conditions of enterprises. In today's global economic integration, the three stock markets will be directly affected by the global political and economic environment.
When the overall global political and economic environment is bad, all markets will be affected, forming an effect that affects the whole body.
If investors invested in stocks in 2007, some invested in Chinese stock markets, some invested in American stock markets, and some invested in European stock markets, then when the financial tsunami broke out in the United States in 2008, the global financial system was dragged down, which in turn led to a collective collapse of global stock markets. This is the stock market system risk.
In this case, no matter how investors allocate in these three stock markets, they cannot avoid the losses caused by this systemic risk.
2. Morey's inappropriate remarks accidentally spread to fried shoes
Recently, another living example happened before our eyes.
Morey, the manager of the NBA Rockets, made an uproar about Hong Kong before the NBA was about to play in China, and then NBA President Xiao Hua expressed his own opinion on this, but this not only did not calm the turmoil, but made it worse. Events get more complicated.
This incident has brought huge losses to stakeholders closely related to the commercial interests of the NBA, and it has also affected the recently popular "fried shoes" family.
The picture below is a screenshot of a conversation that went viral on the Internet:
Speculators who bet heavily on NBA-linked shoes have suffered serious losses because of this accident.
"Fried shoes" has been a hot topic in the investment circle recently. I have specifically discussed fried shoes in a previous article, reminding everyone not to follow the limelight, this hype is not reliable.
At that time, I started from the characteristics of shoe speculation itself and compared shoe speculation with investing in digital currency. I believed that shoe speculation would be unsustainable in the long run.
But I never thought that fried shoes would cause heavy losses because of this black swan incident.
The risk caused by Morey's inappropriate remarks is a typical systemic risk in this industry.
This risk came so suddenly that the market for fried shoes collapsed in an instant, and speculators didn't even have time to buffer. Once this risk broke out, no one would dare to touch these shoes again.
Whether it is the financial tsunami in 2008 or Morey’s remarks this time, although the affected industries are different, the scale of the industry and the groups affected are different, but the characteristics of the systemic risk are shown in the respective industries and the affected investors. all the same.
Overall, systemic risk has five notable characteristics: wide-ranging influence, great destructiveness, strong suddenness, unpredictability, and irresistibility.
3. Investors use diversification to avoid systemic risk
So how do investors avoid systemic risks in the investment market?The only way is to diversify investment and invest funds in different categories, such as keeping part of cash, investing part of digital currency, investing part of treasury bonds, investing part of funds, etc.
This is what we often say about not putting all your eggs in one basket.
Only in this way can we ensure that even when we encounter an irresistible systematic risk in a certain investment field, we can limit the loss within a certain range without causing fatal damage to our finances.
