[[Start here]] → [[manage the monkey mind|Mindset]] → Play not to lose --- ![[play-to-lose-tennis.png]] Let’s face it, we’re all pretty prone to self-defeating behaviours. Nowhere more so than in the stock market. As the old cliche goes, we evolved for survival in the plains of Africa, not for betting our money against thousands of others in 21st century markets. One thing I’ve noticed, time and again, is that everyone wants proven right in their investment decisions. Everyone argues their case, bullish or bearish, and seeks confirmation from those who agree with them. What if rather than seeking to be right, we sought to be *less wrong*? Avoiding major mistakes turns out to be half the battle in most amateur games. As Charles Ellis said about tennis in “Winning The Loser’s Game”[^1]: > The amateur duffer seldom beats his opponent, but he beats himself all the time. The victor in this game of tennis gets a higher score than the opponent, but he gets that higher score because his opponent is losing even more points. Achieving self mastery is a difficult, perhaps impossible, task. It takes a huge amount of work, to align your thoughts (cognitive), feelings (emotional), and actions (behavioural).[^2] It’s so difficult that there are perhaps few, if any, actors in stock markets that have ever achieved it. As Ben Graham has taught us, stock market valuations are governed by Mr Market, a manic-depressive man prone to fits of excitement and depression. He offers high prices one day, and low prices another. He has all the traits of an amateur. Treat the stock market like an amateur game. Don’t play to win. Play not to lose. How would you do this? Well, a simple place to start is to avoid the behaviours that guarantee losing. You can make your own list, but here’s a basic list of losing habits: * Take on lots of leverage * Follow the crowd into story stocks * Concentrate in just a few positions * Surround yourself with people that agree with you * Place lots of trades * Hold onto your losers Do the opposite. Play not to lose. - Use leverage rarely - Seek unpopular [[good stocks beat junk stocks|good]], [[cheap stocks beat expensive stocks|cheap]], [[strong stocks beat weak stocks|strong]] stocks - [[diversify for resilience|Diversify]] smartly across groups - Seek out contrarian views that challenge you - [[successful investors manage their bias to action|Trade rarely, and to a plan]] - Cut your losers [^1]: Winning The Loser’s Game - Charles Ellis [^2]: Designing the Mind - Ryan Bush