More or less ?

A simple one, I guess… Investors who are independently wealthy and don’t depend on their salary as a source of income can earn substantial risk premium by increasing their portfolio allocation to cyclical stocks, even though they are exposed to *more* or *less* than average systematic recession risk. What would you say?

more…?

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Is the question whether the wealthy individual is exposed to more/less recession risk than your averge working class joe? If so it would be less as they don’t depend on income, which is inherently tied to the economy. The cyclical stocks themselves have more exposure. This would mean that the wealthy individual has the ability to take on more recessionary risk in the form of the cyclical stocks and earn a premium to do so.

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That is what I think too. So please correct the following: - Secret sauce, p179 - Study Notes book 3, p238 That’s all for me for today. It 10PM for me, time to come back home and kiss my 3 sleeping girls + my wife. Have a good day guys!

I might be missing the boat here. If the don’t depend on their salary as a source of income don’t they have less recessionary risk as the don’t have to worry about job security?

I am with you pinkman.

mwvt9 Wrote: ------------------------------------------------------- > I am with you pinkman. Ditto.

In brief, we all agree: - Investors who are independently wealthy and don’t depend on their salary as a source of income are *less* exposed to systematic recession risk. - As a consequnce they can earn substantial risk premium by increasing their portfolio allocation to cyclical stocks, the latter being exposed to *more* than average systematic recession risk. Then you decide if you want to change the orginial wording in SN and SS which is : “Investors who are independently wealthy and don’t depend on their salary as a source of income can earn substantial risk premium by increasing their portfolio allocation to cyclical stocks, even though they are exposed to less than average systematic recession risk.”