UPDATE August 2022: I have now updated the stress test tool to take into account a new scenario, as described in full at the foot of this article. The new scenario looks at what would happen if the US entered a recession (dragging the rest of the world with it) as a result of overly aggressive policy tightening (i.e. raising interest rates) from central banks.
Investors, be they professional or DIY investors, don't give enough consideration to the downside potential of their portfolios. When engineers build a new skyscraper they don't just focus on reaching for the stars. In fact, they pay more attention to the structure's ability to remain upright. How will the structure cope in high winds or an earthquake? How much weight can it hold per square inch? This stress testing of materials and construction ultimately lays the foundation for the success of the project.
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