A Game Of Percentages

Equity investments are never perfect - it's always a matter of working to improve your percentages

- Dhirendra Kumar

I'm not sure how many of my readers here are cricket fans but if you have watched any cricket at all, you may have heard the term 'percentage shot'. Conventionally, the way cricket used to be played, most batsmen would play only shots where as far as they knew, they were safe. If something unexpected happened, they could get out but that was never part of the plan. Nowadays, especially in limited-overs cricket, it's the time of percentage shots. The batter knows that there is a certain percentage risk of getting out and that risk is acceptable. Not doing anything and wasting a ball is itself a risk.

In equity investing, everything is a percentage shot. We like to fool ourselves, especially in hindsight, that something was a sure-shot investment but in reality, there is always a probability, with every single investment, that something can go wrong. In this sense, equity investing is essentially a percentage shot. There's always a chance of failure. Not just that, as you invest in a number of stocks and buy and sell over the years, there is a zero chance of not failing and actually a chance of failing often. Most investors who are choosing carefully would fail more than succeed.

But then what?

So, everyone fails; everyone makes mistakes. I do, you do, Warren Buffett and Charlie Munger do, too.