Uploaded October 2019 | Updated September 2026, 21 minutes ago
Far too few investors spend time thinking about the risk of ruin, let alone calculating the probability of ruin associated with their strategy.
Perhaps our number one mistake when investing or trading is represented by our tendency to see things in a linear manner. Let's assume you flip a coin and always re-invest 100%. In that case, even if you have an amazing lucky streak, you will still most likely lose everything eventually because the probability of ruin associated with each coin toss is 50%.
And once you're ruined, guess what: money management becomes pointless because... well, you don't have any money left :)
In many (most) cases, calculating the probability of ruin is far more difficult than with a simple coin toss, it's ultimately all up to you how or even whether or not you do it.
But please do yourself a favor and at the very least think about the risk of ruin when investing or trading. The concept has been explained through this video in just one minute, so it's not like an unreasonable investment of time is required on your part.
Through this video, everything you need to know about the risk of ruin has been explained and if/when necessary, you can also conduct research on the probability of ruin associated with any given strategy.
Far too few investors spend time thinking about the risk of ruin, let alone calculating the probability of ruin associated with their strategy.
Perhaps our number one mistake when investing or trading is represented by our tendency to see things in a linear manner. Let's assume you flip a coin and always re-invest 100%. In that case, even if you have an amazing lucky streak, you will still most likely lose everything eventually because the probability of ruin associated with each coin toss is 50%.
And once you're ruined, guess what: money management becomes pointless because... well, you don't have any money left :)
In many (most) cases, calculating the probability of ruin is far more difficult than with a simple coin toss, it's ultimately all up to you how or even whether or not you do it.
But please do yourself a favor and at the very least think about the risk of ruin when investing or trading. The concept has been explained through this video in just one minute, so it's not like an unreasonable investment of time is required on your part.
Through this video, everything you need to know about the risk of ruin has been explained and if/when necessary, you can also conduct research on the probability of ruin associated with any given strategy.
