InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

$1,230 in Instant Income?

$1,230 in Instant Income?Our top income expert recently pulled the wraps off his breakthrough moneymaking technique. And he proved beyond a shadow of a doubt how you can use it to generate instant cash payouts of up to $1,230 (or more). Over and over again. But then he took things a big step further and guaranteed you can make $1 million by following his program. And the second he did, our phones went nuts! Space is limited — get the details here.

 

 

How Buffett uses these “lopsided bets” to make billions…

By John Persinos on June 9, 2016

Worried about market volatility? Don’t be. 

Just start making “lopsided bets” like Warren Buffett.

The super investor’s recent acquisition of a huge stake in Apple (NASDAQ: AAPL) demonstrates how you can use these bets to use risk to your advantage.

Buffett once said:

“Risk comes from not knowing what you’re doing.”

The financial press loves to quote Buffett, and why not? He’s worth $67 billion, so he must know what he’s doing.

Buffett seemed to know what he was doing, when Berkshire Hathaway (NYSE: BRK.A) announced that it had purchased more than 9.8 million shares of Apple in the first quarter, marking Berkshire’s first investment in the consumer icon.

Berkshire acquired its position at an average price of $109 a share, for about $1.1 billion. But soon afterwards in late May, Apple’s stock price fell to the $90 level, sending Berkshire’s stake in Apple plummeting to $888 million.

Apple fell as low as 14% this year, making it one of the worst-performing stocks in the Dow. It suddenly became fashionable among the chattering class on cable TV to portray Apple as a technological “has been” with its best days behind it.

Had the Oracle of Omaha lost his touch…or perhaps his mind?

Fast forward to mid-June. As of this writing, Apple shares hover at $100 and they’re up 6.63% year to date, as investors start to realize that the Cupertino giant still has plenty of engineering and marketing mojo left. The sentiment now is that Wall Street had overreacted to one weak earnings quarter.

What did Buffett know that the rest of the investment herd didn’t?

Let’s look at one of Buffett’s key tactics for handling today’s investment climate — a climate that’s fraught with a multitude of risks both at home and overseas. Whether the market is moving up, down, or sideways, this method allows you to double, triple or even quadruple your money, without shouldering undue risk.

Buffett is famous for being a value investor, whereby he pinpoints stocks that trade for less than their intrinsic values.

But he also uses another method that you’ve probably never heard of — “asymmetric investing.”

Many of the world’s smartest investors apply this concept and it’s a major factor in how they got so rich. If you want to make serious money, you should understand how it works and leverage it for your own gains.

Buffett’s Berkshire Hathaway is one of the world’s greatest success stories, but it hasn’t racked up returns in a linear fashion. Buffett is 85 years old and he’s seen his share of rallies and crashes, crises and panics, and booms and busts. Through it all, asymmetric investing allows him to balance risk — and as we’ve recently seen, spot a “bottom” in great stocks like Apple.

Asymmetric investing is a strategy whereby the outcome of a trade probably has more profit than loss or risk taken. The upside potential may be greater than the downside loss, or the downside is limited but the upside is unlimited.

“Asymmetric” is the absence of symmetry.

As applied to investing, it means the risks versus the rewards are imbalanced. An asymmetric portfolio entails fewer scenarios where the investment has the potential to lose money and, if it does lose money, the amount lost is limited.

This method preserves capital and offers downside protection. There are more scenarios where the investment has the potential to profit, and when it does the profits are significant.

How does this method differ from conventional investing? Like most investors, you probably weigh risks and returns in a way that’s more directly correlated.

For example, you already know that a small technology stock has more risk than, say, a large-cap tech, but the upside potential is greater. The large-cap stock has more upside potential than a stock mutual fund, but the individual equity confers higher risks. A stock mutual fund has more upside potential than bonds, but the risks are higher…and so on.

It’s a familiar “weighing scale” and it’s fine for investors who are content with making relatively modest gains over the long haul. But it’s no way to become wealthy.

The Math Doesn’t Lie

Consider the math underlying asymmetric investing. Stocks can only go down 100%, but their upside is unlimited.

Sounds simple, doesn’t it? Problem is, most investors either don’t use the asymmetric method or they’re unaware of it. They tend to invest their money with tunnel vision, concerned only with avoiding risk and trying to bet on “sure things.”

But many of the investment world’s top money managers embrace asymmetric investing. They usually don’t use the term, but it’s how they became billionaires. Sure, sometimes they make a losing bet, but over time an asymmetric approach will hit pay dirt for outsized gains that trounce the market.

Editors Note: Asymmetric return opportunities are all around us, and our resident biotechnology expert Dr. Joe Duarte is currently following one such opportunity right now. This company offers, by some estimates, as much as 27 to 1 upside potential. To get the full story, click here now.


You might also enjoy…

 

Forget Buy and Hold. Here’s how to retire faster…

I’m not a fan of “buy and hold.” Gurus like to tell you that patience is the key, but I call horse puckey.

We’ve discovered an investing technique that consistently pays out easy-to-repeat profits.

One that’s proven to beat the market 2,082% in head-to-head testing.

And one that’s generated over 488 winners since 2011.

This method is so powerful, in fact, some of the investors we’ve let use it reported back to us saying they’ve made $71,425… $82,371… and even as much as $151,000 in a single year thanks to this “trick.”

That’s how powerful this investing technique is!

What what exactly is this mysterious method? I’ve put all the details together here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.