What a Video Game Taught Me About Investing

It’s amazing how much can be learned from reflecting on seemingly innocuous and unrelated experiences.1 Nostalgia undoubtedly paints the past in rosier hues, but I’m often left smiling at memories’ unintended lessons. Recently, I chanced upon the following sentence in William Bernstein’s The Investor’s Manifesto:

I emphasize three main principles: first, to not be too greedy; second, to diversify as widely as possible; and third, to always be wary of the investment industry.

As my eyes scanned the passage, the words to not be too greedy brought with them a flash of memory—hours upon hours during childhood spent in the basement den playing Mighty Bomb Jack on the original Nintendo Entertainment System. It was not a particularly interesting or good game, to say the least, and I was not very good at it. It did, however, possess a most curious feature for a video game; players were sometimes “punished” for doing too well.

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When the Worst Case Scenario Still Leaves You a Millionaire

Most investment writing focuses on optimization—how to get the greatest returns, how to outperform benchmarks and earn so-called alpha. And why not? Who doesn’t want beat the market? Who doesn’t want to win? However, many articulate and persuasive writers have pointed out that investing should focus less on winning and more on not screwing up.1 When such a strategy is followed, your short-term highs may not be as high (as those who take on greater risk), but your aggregate gains over the long-term will be enviable.

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