Tony Robbins on Asymmetrical Betting

Tony Robbins on Asymmetrical Betting
This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

Tony Robbins thinks you’re betting wrong! In this video he talks about one of the most important concepts in investing and trading — asymmetric betting. This is important idea to adopt not only for making a large amount of profits, but also to prevent yourself from blowing up your account.

Lots of investors focus on the upside of their investments. But in reality, limiting your downside is far more important. Asymmetric betting helps you do that.

Markets are infinitely complex. And even masters of the universe like Paul Tudor Jones understand that. And that’s why they create asymmetric bets so that they can give themselves a lot of leeway to fail. They want a lot of room to screw up. There are very successful strategies that only have a 30% win rate. For a majority of the time, they’re losing! But because each bet is asymmetric, their wins more than cover their losses. They make sure they only lose a very little bit when they’re wrong, but make a very large amount when right. That’s how they come out ahead.

Not losing is so important in investing. It’s extremely tough to dig yourself out of a hole. If you have $100 and lose 50% you have $50. To get back to that $100 it doesn’t take an equivalent 50% gain… it takes a 100% gain! That’s very tough to do. That’s why the best method is to prevent yourself from losing in the first place. Investing is about defense.

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