Chamath Palihapitiya, chairman of spaceflight company Virgin Galactic who bought one million Bitcoin (BTC) in 2013, is outlining his investing strategy for spotting the next big trade.
Palihapitiya says great investors focus on slugging percentage, which considers risk management and position sizing, rather than on batting percentage that focuses only on the returns and does not consider the level of risk involved in achieving them. He says smart investors find one big winner and then ride it hard.
“Investing 101: Don’t confuse slugging percentage with batting average. The former is being the cool kid in high school – you’re a rare thing and everyone wants to know the secret. The latter is like going to the prom with your mom. Everyone talks about it, but not kindly.”
“[Savvy investors] know when to capitulate, buy up, when to be ‘risk on’ and ride the winners. They care more about owning a big piece of one winner vs irrelevant pieces in many winners.“
Palihapitiya made a big bet on Bitcoin in 2013. At the time, the price of the king coin was only around $80. With the flagship cryptocurrency currently hovering at over $10,000, his investment is now worth over $10 billion.
Palihapitiya also says that since the traditional approach of investing in equities and bonds for retirement no longer works, it is a good idea to increase exposure to alternative assets like crypto, art, cars, and baseball cards.
He says most people currently have between 0% to 5% investments in alternative assets, but this may change if bonds continue to return zero.
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