Tail Risk

Tail risk is the possibility of an extreme, unexpected market event that falls outside normal trading patterns—think a sudden market crash or a company's shocking bankruptcy. You'll hear about it because these rare events can wipe out gains or cause losses way bigger than typical day-to-day stock movements. Most investors focus on average outcomes, but tail risk reminds us that markets sometimes do unusual things. For example, a tech company might trade predictably for years, then face a scandal that tanks its stock 50% in a week. Smart investors think about tail risk by diversifying their portfolio and not betting everything on one outcome, so they're prepared if something weird happens.