Are you playing a winner’s game or a loser’s game?
Important to choose when its important to win and when its important to not lose
This post is reposted from Investacus.com, my old blog.
In life we need to decide our battles, the same is with deciding what we should be good at (Winner’s game) or not fail at (Loser’s game).
In short, do you play to win or do you play to not fuck up?
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When investing you also need to choose between these two options, what should you choose?
Well, it depends on your commitment to the game. Do you want to be aware of the investments you make every week and scan the market continues to make sure your investment is intact? Then you can play a winner’s game, if you are not well then play a loser’s game.
Now I understand nobody wants to associate with a loser, but that is the opposite of the loser’s game. You are trying to avoid being the loser while in a winner’s game you trying to be the winner.
Or as Charlie Munger said: "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be intelligent."
I am trying to illustrate here a normal distribution of investors’ performance where you want to place yourself.
If you are playing a winner’s game you play to be in the top half of the top half if that makes sense. While you play a loser’s game you play to be in the top half of the bottom half and be as close to the mean as possible.
What should you then do when you invest?
Well in a loser’s game you should invest in mutual funds and preferably cheap index funds.
If you decided to play a winner’s game, you are in for a ride and a lot of work to do. It doesn’t need to be complex, but it will not be easy. But aside from the hopefully higher return, you will have oceans of knowledge to dig down on which is for me the most interesting in investing.
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