In this week’s SteadyTrade podcast, hosts Kim Ann Curtin and Stephen Johnson welcome a special guest — author, speaker, and strategist Michele Wucker.
If you trade stocks, you need an appetite for risk. But how much is too much? And can your risk tolerance change over time or is your “risk fingerprint” set in stone?
Michele Wucker is here to break it all down. She even has books on the topic…
- “You Are What You Risk: The New Art and Science of Navigating an Uncertain World”
- “The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore”
Wucker dedicates her life to the study of risk. Her work has moved markets, shaped financial policies around the world, and helped frame warnings about pandemics. She’s a former think tank and media executive, and she’s the founder of Gray Rhino & Company.
Fun fact: she coined the term “gray rhino” to describe “obvious, probable, and impactful risks that we tend to ignore.”
Her concepts have also made their way into popular culture. Megaband BTS wrote the song “Blue and Grey” positioning depression as a gray rhino. And she has a TED Talk with over two million views.
Kim, Stephen, and Michele Wucker talk all about risk and trading in this week’s episode!
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Michele Wucker Wants You to Anticipate Gray Rhinos
Most traders know the term “black swan.” The investment world uses it to describe events that come ‘out of the blue.’
But how true is that? Experts warned about the subprime mortgage crisis well before the bubble popped. No one listened.
Recently, if you tried to trade right after the Colonial Pipeline debacle, you saw chaotic markets. It seems like that event came out of nowhere. But again, experts warned about power grid vulnerabilities many times.
Michele Wucker wants us to wake up to our gray rhinos. This applies whether you’re a day trader, swing trader, or jumping into the crypto fray.
When a big, scary challenge comes at you, you can do nothing and get trampled, get out of the way, or do something about it. Why do some people move out of the way while others work with the strength and use it?
Learn all about your risk habits and how to improve them in this week’s episode.
How Much Should You Risk?
Stephen knows there’s no escaping risk once you place a trade. But he’s curious about how people decide what level’s right for them.
Michele Wucker says there are many factors to consider. It’s not just about personality either. How comfortable you are in your immediate environment can impact your approach to risk. Some people’s moods change with the room temperature!
Risk tolerance is situational. Michele gets into the many ways a person’s risk tolerance can shift based on their foundation of safety at the time.
Kim wants to know more about Michele’s groupthink concept. The risk acceptable to a group can affect how much risk an individual in that group will take on.
But what’s the actual impact? And can you go from buy-and-hold investor to crypto aficionado based on your friends?
Sometimes risk is in the eye of the beholder. For example, cultural bias can prevent us from seeing certain leaders clearly. Kim and Michels get into real-life examples of how female leaders are perceived versus how they perform.
You’ll want the facts on this before your next hot stock fundamental analysis.
Is Risk Always Good?
Stephen finds risk fascinating. Michele Wucker’s book changed how he thinks about appropriate risk.
He recalls a man who quit med school to become a stand-up comic. In the past, Stephen would’ve dismissed the guy as “completely nuts.” Now, he sees that having a caring family, mentors, and some financial stability made the risk more sensible for him.
He loved the family’s message: “If you do what makes you happy, ultimately you’ll become enough of an expert at it that you’ll be able to make enough money.”
Kim loves how Michele Wucker flips the risk script. She points out that people who force themselves into ‘safe’ jobs and lifestyles sometimes suffer long term.
As Michele says, “People underestimate the risk of going along with others, living what they want your path to look like. That can destroy your health, happiness, and ability to succeed. Everything can come crumbling down because the road you thought was the safest actually wasn’t.”
Kim sees this firsthand in her coaching practice. Clients come to her when their carefully planned lives come crashing down. That’s why she’s so supportive of traders who follow their passion.
Wucker says many traders and freelancers feel more secure having diverse sources of income. If you’re told to diversify your portfolio, why not your income?
But Stephen reminds us that sometimes overconfidence can lead to big losses. Wucker replies with a strategy for dealing with overconfidence that blows Kim away.
This week’s episode is jam-packed with valuable tips to improve your relationship with risk. Check it out!
What Do You Think of Michele Wucker and the Gray Rhino?
What’s your appetite for risk? How do you respond to challenges? And how does your risk tolerance change? We’d love to hear what you think, so drop a comment.
Remember: if we select your question or comment as an on-air topic, you could win a SteadyTrade mystery gift box. Leave a comment below or on YouTube!
Thanks for tuning in to the SteadyTrade podcast. Stay tuned for weekly episodes featuring the hottest topics for aspiring traders.
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Meet Our Hosts and Special Guest
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Kim Ann Curtin