Asymmetry

You’d have to ask a biologist to be certain, but I suspect that things in nature tend toward symmetry. The left side of the human face tends to look like the right side. One edge of a leaf looks largely like the other. Not so for investment gains.

Regardless of market optimism, regardless of where we are in the market cycle at a particular moment, regardless of what you think the economy holds in store, the potential for gains is astronomically asymmetrical to the likelihood of losses over time. The reason is simple. The most you could ever lose on an investment is 100% of your initial capital. The most you could gain is infinity.

Infinity is a pretty stupid word when talking about investing. But the 10,000% gain you would have gotten from your ownership in Netflix or Amazon is indistinguishable from infinity.

Because of the asymmetry between gains and losses, it is not absurd to propose that if you make 20 investments and 18 of them turn out to underperform or merely perform with the market averages, just holding those two remaining stocks for the long term just might put you in a position of life-changing outperformance.

Imagine that. In what other context can 10% of your decisions that result in a positive outcome outweigh the other 90% of your decisions that have a negative outcome.

As investors, the odds are heavily tilted in our favor. If for no other reason, the best time to start investing is now.

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