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It’s How Big, Not How Often, That Counts

Tue, 15 Nov 2011 11:08:58 GMT

Soros' Batting Record George Soros, one of the greatest investors of the last fifty years, has a fairly poor batting record when you look at the total number of strikeouts he’s had over his career. By his own account he’s been wrong about investments more than he’s been right. However, when he’s been right he’s been right BIG time: "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong";  Unfortunately human behavioral biases make most of us shy away from taking lots of losses and trick us into giving up the potential big winners. Our problem is that our biased brains punish us much more for failure than they reward us for success: so we prefer frequent small wins and few losses to frequent small losses and few wins. And, as Soros proves, our brains are wrong.  Fortunately there are a few simple techniques that guide us right. Long-shots and Favourites The probability of a...

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