Over the Long Term, the Riskiest Investment Could Be the Safest

By
A A A

Taking a lot of small risks, when added up, may actually be a safer strategy than pursuing just one or two "safe" plays.

Let's play a game.

I flip a coin. If it's heads, I'll pay you $150. If it's tails, you pay me $100. Is this a game you want to play?

Well, if we played only once, I'm guessing the answer is probably "no." For most people losing $100 is far more hurtful than taking the risk to win $150. If $100 doesn't scare you off, what if I change the numbers to $15,000 and $10,000. Would you still like to play?

Most wouldn't.

The reason? Loss aversion. Loss aversion is a tendency to avoid risks that are skewed in our favor because we abhor the idea of losing.

Now imagine I allowed you to play the game as much as you want. In this case, you'd be foolish to reject my offer. Every coin toss puts you, on average, $25 ahead, and the chance of losing decreases as you play more. ( I've talked about this mathematical fact numerous times in my Options Advantage service, particularly when discussing my high-probability options strategies.)

So in this case, taking many "risky" decisions ends up adding to a fairly safe bet.

When considering a so-called "risky" investment, the decision is much like the coin-flip game you can only play once. You may win, but there's also a good chance you'll lose.

But ultimately having a long-term approach allows you the benefit of playing the multiple coin-flip game. The more you play, the safer it becomes.

That's what I do in my Options Advantage service and that is exactly what my esteemed colleague, Tyler Laundon, is doing in his new service  - the 100% Letter .

Over the past few months he (and his subscribers) has enjoyed big wins, including returns of 221%, 111%, 157% and most recently 152%.

Of course he has had some losers along the way. Who doesn't? But Tyler allocates only small percentages to each position - otherwise known as asset allocation or, as I like to call it, position-sizing.

Even a small amount of money invested in these stocks can make a big, positive impact in terms of your portfolio's total return.

So I don't need to explain the importance of setting aside at least a small portion of your portfolio for investing in a select few stocks with tremendous upside potential. The question, of course, is how to identify those special stocks.

For the answer, I turn once again to Tyler …

In fact, there is one common thread among all of these stocks that resulted in their handsome gains. And that thread is the subject of Tyler's live investing seminar that our own Ian Wyatt is hosting this Thursday at 2:00 pm -   " The Secret to Finding 100% Winners ."

During this free, interactive event you'll find out everything you need to know about Tyler's strategy … and how you can safely put it to use with just a small portion of your portfolio to capture more of the big gains that we've enjoyed over the past year.

Attendees at Tyler's seminar will learn the following:

  • Everything you need to know about Tyler's powerful secret signal, including exactly how it shows you which stocks are ready to break out and double your money.
  • How you can safely apply his strategy, and capture these big gains with reduced risk, using just a small portion of your portfolio.
  • All the details of one fast-growing stock that could double within the next 12 months.

To reserve your seat at this special free event, simply click here to get signed up .

Remember, even the safest investments have some risk attached. So don't make the mistake of going for the big hit just once or twice. If you do, investing will resemble the one-toss coin flip rather than the multi-toss version. This means that the safest option, in the long run, may be to take some chances.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks:

Wyatt Investment Research

Wyatt Investment Research

More from Wyatt Investment Research:

Related Videos

Finding Heart in an Organ
Finding Heart in an Organ           

Stocks

Referenced

Most Active by Volume

113,378,902
  • $16.79 ▲ 1.33%
89,763,454
  • $7 ▲ 6.54%
67,512,111
  • $42.88 ▲ 3.93%
60,846,215
  • $101.66 ▲ 0.23%
52,286,887
  • $16.38 ▼ 7.09%
42,129,258
  • $52.19 ▲ 2.98%
36,281,096
  • $46.695 ▼ 0.65%
31,634,172
  • $25.16 ▼ 0.08%
As of 9/12/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com