Thread: Slugging Percentage vs. Batting Average

Here are the definitions of slugging percentage and batting average.

Batting average = hits / at-bats. In investing = successful outcomes / total outcomes.

Batting average = your win rate.

The whole "you need to be right 51% of the time to be successful" is complete BS.

Slugging percentage = total bases / at-bats. Giving more weight to doubles, triples, and home runs.

Instead of measuring your success rate as binary like good/bad decision, measure it on a scale of how good/bad. Ex. 1,000% or -80%?

You don't need to be right even close to 51% of the time.

10 stocks. 10% each:

One 20x
One 10x
One 5x
Four 1x,
Three 0x.

Spread over 5 years = 31% CAGR.
Spread over 7 years = 21% CAGR.
Spread over 10 years = 14% CAGR.

Humans have an aversion to failure, but this isn't blindly throwing money out the window.

"Given a ten percent chance of a 100 times payoff, you should take that bet every time." - @JeffBezos

10% x 100x = 10x. That's the expected outcome.

Given you've done your research, you're confident in the company, but fear failure, make it a small portion of your PA.

If it fails, so what it was a small portion of your PA and was a calculated bet.

If your confidence grows and you now believe the odds of success have increased or if the mega-bull thesis has grown, you may want to increase your position size.

This thread was meant to be for new investors or those who are afraid to take calculated bets. Your PA should likely consist of quality stocks with low risk relative to "moonshots" but not a bad idea to throw some money at the "next $AMZN, $NFLX, or $MSFT."

I know some investors like @InvestmentTalkk, @BornInvestor, and @ztinvesting have a "moonshot" portfolio that is separate from their main PA.

A moonshot portfolio doesn't even have to include stocks, it could be bitcoin or other assets that might 100x in value. https://twitter.com/chamath/status/1308608237529309184?s=20