You can view + comment on this post at rftr.substack.com
Here on Reel From The Real, i write what i’ve learned in investing x personal finance.
My goal is to:
share optimistic and positive energy - because the hustle is real x rough enough
personalise personal finance that bit more.
😎 To your wealth,
Aila Obiocha
Hi guys,
Here’s an interesting truth: investing is a game in which you can be wrong half the time, and still win — BIG. It is impossible to avoid losing. It’s in the DNA of the game. Losing is the tuition fee we pay in the school of investing.
Here’s a curious observation: most newbie investors embrace losing. In trading groups and on social media, people rationalise losing in investing as though it is some sacred rule of the game.
I read a lot of soundbites like
“you win some, you lose some...”
“you will lose some money...”
“sometimes it (price) goes up, sometimes it goes down...”
“in angel investing, of course you will lose some money, but…”
“that’s the stock market, you lose...”
And there’s the one that makes me want to set something on fire 🔥 :
“only invest what you can afford to lose” / “don’t invest more than you can afford to lose”
What makes you think that you can afford to lose anything - at all?
In these cute and nice-sounding one-liners, people rationalise losing without analysing it. You will lose some money. Okay, but why? You win some, you lose some. Okay, but why? I can count on one hand the number of posts or threads in which I’ve seen people analyse why they lost money in an investment. Honestly, even if you are a day trader or crypto NFT flipper, you should know why you lost money in your strategy.
Look, I get it. Losing is fundamental to any game. This is why winning feels so amazingly good. But, I feel investing is the only sport in which it is considered socially and psychologically acceptable to lose. In any other competitive sport, people analyse their losses to the minutest detail — to understand the reasons why, and create strategies to come back stronger and win bigger. In any other game, the physical and psychological consequences of losing are clearly understood. Losing is unavoidable, for sure, but it is not acceptable, and it is certainly not embraced. This is why players and coaches in other sports focus ruthlessly on avoiding losses.
Investing is no different to any other sport. So why would you do anything other than play to win and avoid loss? Success requires a ruthless focus on winning, and the ability to translate the lessons from unavoidable losses back into winning big. In other words, we are not supposed to embrace our losses, but to turn our trials into triumphs.
Bernard Baruch said investing is not about how much you make, but how much you don’t lose. Warren Buffet said his first rule of investing is “never lose” and the second rule is “don’t forget rule #1”.
Granddaddy B was basically telling us that not tolerating losing is 2X as important as any other move you will make in the sport of investing.
These investing G.OA.T.S understand that with personal wealth, as with most games, it can be impossible to bounce back from loss. Loss can be fatal to your financial freedom. Loss can take you out of the game completely — and sometimes out of this world... Investing is one rare game in which loss can leave you worse off than you started, and set you back below zero. This is why you should absolutely never tolerate losing.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said.
“Gradually, then suddenly.”
- Ernest Hemingway
The problem is not that you will lose. That’s a given.
The problem is that you don’t know why you will lose.
And if you don’t know why you are losing, why are you playing?