Referring back to the Investors Anthology book reminded me about this great investing essay titled The Loser’s Game. the_losers_game.pdf (52.0 KB) Investing is not all about picking winners, but avoiding losers as well.
The essay includes a super correlation between amateur tennis and investing. In amateur tennis you can win matches simply by allowing your over-ambitious opponent to make too many mistakes:
“The strategy for winning in a loser’s game is to lose less. Avoid trying too hard. By keeping the ball in play, give the opponent as many opportunities as possible to make mistakes and blunder his way to defeat. In brief, by losing less become the victor.”
I have tried to ‘lose less’ with shares by going for simpler opportunities, while avoiding over-ambitious investments that involve more speculation, complexity and probably more mistakes.
This approach will never see me top any leaderboards, but — now using a cricket analogy! — hopefully keeps me at the crease while other players retire hurt.
My disaster with Tasty shows the significant effect one great loser can have.
Without Tasty, my portfolio would have recorded annual gains of +10.6%, +19.1%, -1.8% and +16.1% = +50.2% total.
I would have doubled my returns had I made one less mistake.
Wishful thinking perhaps, but I don’t think I have made too many investing errors.
Peter Lynch once said “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”
This table keeps track on how many shares I have got right and how many I have got wrong.
I have bought 32 different shares since 2004, of which (as at 30 September) 22 resulted in a profit and 10 resulted in a loss. So a 6.9 out of 10 success rate.
Looking at the 21 shares I have bought and then sold since 2004, 14 show a profit and 7 show a loss — so 6.7 out of 10.
So I am just ahead of Peter Lynch’s 6 out of 10, but not by much.
I just wonder if anybody here thinks first about trying to limit losers rather than pick winners?
Or is owning losers just part of the game — and what really counts is ensuring you own a few big winners to compensate?
And has anybody got close to 9 winners out of 10 — something Peter Lynch implies is impossible?