Win by Losing Less

Recently, I discovered a little-known book called Extraordinary Tennis for the Ordinary Player by Simon Ramo while reading this great post on the Farnam Street blog. The article didn’t catch my attention because of my diehard tennis interests or ability; my tennis skills would be described as amateur at best. But I was fascinated by the idea that you could divide tennis into two different games: one played by amateurs, and the other played by professionals.

At first glance, tennis seems to be a simple game played in a similar fashion with the same rules by all players across every skill level. The goal is the same, too: score more points than your opponent. But according to Simon Ramo, a scientist and statistician, that’s where the similarities end between a game played by professionals versus a game played by amateurs.

In his research, Ramo tracked points in professional and amateur matches and came to the conclusion that tennis played by amateurs is usually a contest of who can make the fewest mistakes. In other words, success in amateur tennis comes to those who can avoid beating themselves.

“In expert tennis, about 80% of the points are won; in amateur tennis, about 80% of the points are lost,” Ramo explains. “Professional tennis is a Winner’s Game – the final outcome is determined by the activities of the winner – and amateur tennis is a Loser’s Game – the final outcome is determined by the activities of the loser. The two games are, in their fundamental characteristic, not at all the same. They are opposites.”

Recognizing this difference, Ramo developed a simple strategy for amateurs to win more matches. You just need to avoid mistakes and let the opposition beat themselves. You can win more by losing less.


There are compelling parallels between this fact of tennis and what we often see happen in the world of investing.

Like professionals in tennis, professional investors (as opposed to the amateurs) only become professionals by vast repetition and training that allows them to avoid common mistakes made by amateurs. And like the tennis-playing amateurs, amateur investors tend to lose because of their own activities and their failures to avoid those same mistakes.

In investing, it’s often easy to think you’re a professional, playing to win more instead of losing less. When was the last time you heard a friend at happy hour, a colleague at work, or someone at the barber shop tell you about a great stock pick you’ve got to get in on? That’s an amateur playing like a professional, which opens them up to making more mistakes that will ultimately cost them important wins on the path to their financial goals.

And yes – amateur tennis players do occasionally hit a terrific shot to win a point (among the many unforced errors), just as amateur investors do occasionally pick a great investment (among the poor ones that we rarely discuss). But there’s a difference between luck and skill, and the goal in either tennis or investing isn’t to score an occasional point. It’s to win the whole match, or to achieve your biggest financial goals.


Non-professional investors can adopt a similar strategy to Ramo’s advice to tennis players to play to lose less (rather than trying to win more). Here are a few ideas on how to do exactly that:

Have a financial plan: By creating a financial plan that articulates your financial goals, dreams, uncertainties, and timelines, you are building a personal road map to financial success. As the old adage goes, if you fail to plan, plan to fail. A well-articulated financial plan can help you keep focused on your long-term goals and avoid mistakes driven by fluctuations in the market or your own emotions.

Consider ETFs as part of a passive investment strategy: If you recognize the brilliance of winning more by losing less, a passive investment strategy utilizing low-cost ETFs can be a great way to accomplish this objective. Active mutual funds seek to outperform the market – or win more. Passive ETFs, however, seek to earn the same return as their benchmark, less their low fees. They try to lose less.

Because ETFs fees are often much less than active funds, they often outperform their active peers. The annual S&P Index Versus Active (SPIVA) report reminds amateur investors how difficult it is even for professional investors to outperform their benchmarks, in large part due to their high fees. 89% of large-cap active funds have underperformed the S&P 500 since 2010.1

Avoid big bets by maintaining a diversified portfolio: Owning individual stocks can be entertaining for investors but there’s a good reason most professional money managers limit their exposure to any individual investment to less than 5% of their portfolio.

Owning individual stocks in high concentrations is risky, whether it feels that way or not. For every Tesla stock that amateurs love talking about, there’s a Wirecard stock (down 99% year-to-date) that they seem to forget.

If owning a particular stock excites you as an investor, consider it as part of your cheat day strategy. For the rest of your portfolio, focus on having a well-diversified balance of stocks and bonds that aligns with your financial goals and comfort with risk.


While the strategies above can be helpful anytime, we also need to consider one way to “lose less” that is very specific to the current moment. For the next several months, financial media outlets will be consumed with who will win the presidential election, who will control Congress, and what (they think) it all means for the markets.

It happens every election year. So before we climb aboard this emotional roller coaster, let’s take a short ride back to 2016. The day before the election, Hillary Clinton’s chances of winning were as high as 91%.2 Many prominent economists predicted a strong market sell-off if Donald Trump won.3

Both outcomes were viewed with a wide consensus about their accuracy… and neither proved to be right.

It’s true that presidential elections have historically proven to create short-term volatility. But over time, it’s market fundamentals such as the health of the economy, corporate earnings, and the level of interest rates that drive the direction of the stock market – not who wins the presidency or control of Congress.

Investors tend to want to win more when it comes to choosing stocks, funds, and managing their investments. It’s in this desire that we can see the parallels and choices that Simon Ramo offers amateur tennis players.

Ramo says “if you choose to win at tennis – as opposed to having a good time – the strategy for winning is to avoid mistakes.”

For investors, the question is simple: are you investing to achieve your financial goals or to have a good time? If it’s the former, your best chance of success is to focus on winning by losing less.

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying, `It’s the strong swimmers who drown’.” – Charlie Munger, business partner of Warren Buffett


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This Commentary is provided for informational purposes only.  The Commentary should not be construed as personalized investment, tax or legal advice, including the recommendation to engage in a particular investment strategy.  This Commentary, by itself, does not contain enough information to support an investment decision.  All information in this Commentary is considered accurate at the time of production, but no warranty of accuracy is given.

Furthermore, investors should not assume that future performance of any specific index, security, investment product or strategy referenced in the Commentary, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). Past performances referenced in the Commentary may not be indicative of future results and may have been impacted by events and economic conditions that will not occur or prevail in the future. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices referenced in the Commentary are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products.  Investing involves the risk of loss and investors should be prepared to bear potential losses, including the full amount invested.

By |2023-04-14T13:10:55-05:00September 1, 2020|Uncategorized|Comments Off on Win by Losing Less

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