To Win You Have to be Willing to Lose – A Wealth of Common Sense

In almost every part of life, the people who “win” accept something the rest of us try desperately to avoid: loss.
Investors who retire comfortably, entrepreneurs who build real companies, even athletes who collect trophies all
share the same uncomfortable reality they lose a lot along the way.

Nowhere is this more obvious than in the stock market. We all want equity-like returns with bond-like volatility.
We want the long-term growth of stocks without the stomach-churning drawdowns. In other words, we want to win
without ever feeling like we’re losing. That’s not how any of this works.

Ben Carlson’s classic idea from A Wealth of Common Sense is brutally simple: if you want the long-term
rewards of investing, you must be willing to endure short-term losses. Not enjoy them, not high-five them,
but accept them as the price of admission. That idea isn’t just a clever quote for your Twitter bio; it’s backed by
decades of market history, behavioral finance research, and the real-world experience of anyone who’s ever held
a portfolio through a real correction.

Risk and Reward Are a Package Deal

The first uncomfortable truth of investing is that returns don’t show up for free. Stocks offer a “risk premium”
a higher expected return than cash or bonds precisely because they can and do lose money, sometimes in large,
sudden chunks. If there were no meaningful risk of loss, there would be no reason for the market to pay you more
for owning stocks than for parking cash in a savings account.

What Market History Actually Looks Like

Carlson analyzed the S&P 500 going back to 1950 and looked at the worst peak-to-trough drop (the maximum
drawdown) in each calendar year. The picture is not exactly soothing. About half of all years since 1950 have
experienced a double-digit drawdown at least a 10% temporary decline at some point during the year. Yet during
that period, stocks still produced roughly 11% annualized returns over the long run. Losses and gains came as a
bundled set, not as separate menu options you can pick and choose.

Even more counterintuitive: in many of those “scary” years, the market still finished up. Carlson found that of the
years that saw double-digit drawdowns, well over half still ended with positive annual returns. In some cases, the
market fell 25–30% during the year, only to claw its way back and finish in the green by December. The ride was
ugly; the destination was just fine.

Large investment firms that study market volatility for a living see the same pattern. Research from major
index providers and asset managers shows that big up days and big down days tend to cluster together the same
turbulent periods that make you want to bail are often when a handful of strong positive days show up and save
your long-term returns. Miss those days by jumping in and out, and your “safer” behavior can quietly shred your
performance.

The takeaway: if you want the long-term return profile of equities, you must be willing to live through years that
feel terrible in the moment. Winning over decades means losing, repeatedly, over days, weeks, and sometimes years.

The Psychology of Losing Money

That all sounds very rational until you see your portfolio drop 15% in three months. Then your brain switches
from “rational investor” to “person watching their life savings get punched in the face.”

Behavioral finance research has a name for this: loss aversion. On average, people experience the
pain of a loss about twice as intensely as the pleasure of an equivalent gain. Lose $1,000, and it feels far worse
than the joy you felt when you made that same $1,000 in the first place. That emotional imbalance is hardwired into us.

Carlson opened his post with two caricatures of investors:

• The ones obsessing over the next 5–10% correction, constantly waiting for the “right” moment to invest.
• The ones who become complacent, assuming that markets will never really hurt again.

Both groups are set up to fail. The fearful investor never gets fully invested or keeps bailing out at the first sign
of trouble. The complacent investor takes on way more risk than they can handle, then panics when volatility returns.
Different starting points, same ending: buying high, selling low, and hating the process.

Academic and practitioner research on behavioral finance keeps documenting the same pattern. Individual investors
tend to chase what has recently done well, abandon what has recently done poorly, and massively underestimate how
hard it is to stay invested when markets are in free fall. The math of the market says you must be willing to lose
to win; the wiring of your brain screams the opposite.

Becoming the Kind of Investor Who Can “Lose” and Still Sleep

The goal is not to become immune to losses. Nobody enjoys seeing their net worth drop. The goal is to build an
investment plan and a mindset that assume losses will happen and make sure they don’t derail you when they do.
That’s where common sense beats complex strategies every time.

1. Decide What Kind of Losses You Can Live With

Before you pick funds or stocks, you should answer a simpler question: How big of a temporary loss can I honestly
tolerate without freaking out and blowing up my plan?

Big asset managers constantly remind investors that asset allocation is mainly about matching risk to temperament,
not about predicting next year’s returns. If a 30% drop in your portfolio would cause you to sell everything and go
to cash, you probably shouldn’t be in an all-stock portfolio, no matter how attractive the long-term return chart looks.

A more balanced mix of stocks and bonds, or even a more conservative tilt, may mean slightly lower expected returns,
but it massively increases the odds that you’ll stick with the plan during the next bear market. In the real world,
the “best” portfolio is the one you can hold through ugly times, not the one that looked smartest in hindsight.

2. Diversify Like You Actually Expect Bad Years

One of the best ways to be willing to lose is to make sure no single loss can destroy you. That’s what diversification
is for. Spreading your money across different asset classes, sectors, and geographies doesn’t prevent losses, but it
reduces the odds that everything crashes at the same time for the same reason.

Recent years have provided a good reminder. After a big run-up in a handful of mega-cap tech stocks, many investors
crowded into the same “Magnificent Seven.” When those names stumbled, portfolios that were overly concentrated
in them took disproportionately large hits, while more diversified portfolios experienced shallower drawdowns.
Diversification doesn’t always feel exciting during bull markets, but it tends to shine when the party ends.

Common-sense investing means building a portfolio that assumes leaders will change, sectors will cool off, and
market darlings will eventually disappoint. You diversify because you’re honest about the fact that you can’t see
around corners and you don’t want any single bet to decide whether you win or lose.

3. Focus on Time in the Market, Not Market Timing

If losses are inevitable, wouldn’t it be better to avoid them by jumping out of the market whenever things look shaky?
In theory, sure. In practice, this is where portfolios go to die.

Studies that track investor performance show that attempts at market timing usually do more harm than good.
Investors tend to sell near lows, buy back near highs, and miss a few of the best days that contribute a large
share of long-term returns. Warren Buffett, never one for complicated strategies, suggested that most people
would be better off with a simple allocation to a low-cost stock index fund plus some high-quality short-term bonds
and then leaving it alone.

That simple, boring approach is built on the assumption that volatility is normal and that trying to outguess it is
a losing game. Again: to win, you must be willing to lose along the way.

4. Write Down Your “When It Hurts” Playbook

Hope is not a strategy. A practical way to handle inevitable losses is to decide in advance how you’ll behave when,
not if, markets fall.

A written plan might include:

• The maximum stock allocation you’ll hold based on your risk tolerance and time horizon.
• A rule like “I won’t check my portfolio more than once a month.”
• A specific strategy for rebalancing for example, adding to stocks when they’re down a certain amount.
• Clear language about what you won’t do: no panic selling, no all-in bets on the hottest fad, no leveraged YOLO trades.

When a 10–20% drawdown hits, this playbook becomes your script. Instead of improvising your way through fear,
you execute a plan that assumed fear was coming. That’s a very different experience.

What “Being Willing to Lose” Looks Like in Real Life

The idea of accepting losses sounds abstract until you see it play out in day-to-day decisions. Here are a few
examples of what this mindset looks like in practice.

The Long-Term Investor Who Sticks to a Simple Plan

Imagine a 35-year-old investor who puts money into a diversified portfolio every month, rain or shine. During a
big correction, their account falls 20%. Friends are texting scary headlines. Social media is full of crash calls.
The temptation to “pause” contributions is strong.

Instead, this investor keeps buying. They recognize that stocks are, in effect, “on sale.” They understand that
bear markets are normal, that drawdowns show up regularly in market history, and that future gains are often born
from periods of maximum discomfort. Years later, those buys during the scary times contribute massively to their
overall wealth.

They didn’t enjoy losing 20%. But they accepted that loss as temporary, as the cost of long-term growth. That is
what it means to be willing to lose in order to win.

The Near-Retiree Who De-Risks Before the Storm

Now picture someone five years from retirement. Rather than chasing the latest bull market, they gradually shift
part of their portfolio into bonds and cash-like assets. When the next downturn hits, their portfolio still declines,
but far less than a 100% stock allocation would have.

Did they “lose” some upside by being more conservative in the final years of their career? Probably. But they also
avoided the much more painful scenario of seeing their retirement date collide with a 40% drawdown. They accepted
the possibility of leaving some gains on the table in exchange for sleeping better and protecting their lifestyle.
That’s another form of being willing to lose a little in order to win big where it really matters.

The Everyday Saver Who Ignores the Noise

Finally, think of a worker who simply auto-invests into a retirement account, barely glancing at headlines. They
don’t try to outsmart the Fed, guess election outcomes, or read every macro forecast. They focus on saving a little
more each year, keeping costs low, and letting time do most of the heavy lifting.

Over decades, this boring strategy often outperforms elaborate, hyperactive trading. Why? Because it’s built on the
acceptance that volatility is inevitable and that the right response to short-term losses is usually “do nothing”
or “rebalance,” not “panic and reinvent the wheel.”

Beyond Money: Losing to Win in Life

The principle behind “to win you have to be willing to lose” isn’t confined to your brokerage account.

• Career: Taking on a stretch role, switching industries, or starting a business means risking status, comfort, and sometimes income. Without that risk, there’s rarely significant upside.
• Relationships: Being honest, setting boundaries, or walking away from unhealthy dynamics can feel like immediate losses but they open the door to healthier, more meaningful connections.
• Learning and skills: Every new skill starts with looking clumsy. If you’re not willing to be “bad” at something for a while, you’ll never get good at it.

In each case, the people who grow the most are the ones who accept short-term discomfort for long-term gain.
That’s the essence of common-sense investing, and honestly, common-sense living.

Real-World Experiences: Living the “Willing to Lose” Mindset

To make this even more concrete, let’s look at a few longer, experience-style examples that show how this mindset
unfolds over time. Think of these as composite stories built from the patterns advisors and investors report again
and again.

Experience 1: The 2008 Survivor Who Benefited in 2020

In 2007, Alex was in their late 20s, finally earning enough to invest in a 401(k). They picked a simple mix of
stock index funds and watched the account balance grow for about a year. Then 2008 happened. By early 2009,
Alex’s portfolio was down nearly 40%. Every headline screamed “worst crisis since the Great Depression.”

The emotional temptation was obvious: stop contributions, maybe even sell out “until things look safer.” Instead,
Alex made one uncomfortable decision: keep going. Part of that was stubbornness, but part came from understanding
that bear markets had happened many times before and that long-term investors who stayed the course historically
did better than those who fled to cash and never fully got back in.

Fast-forward to 2020. When the COVID-19 crash hit, Alex’s portfolio again took a sharp hit. But this time, the
emotional reaction was different. “I’ve seen this movie before,” Alex thought. “It feels awful, but it’s not new.”
Having lived through one brutal bear market made the second one easier to endure. The earlier willingness to lose
to watch big, temporary drops without bailing meant that by 2020, Alex had both more money and more emotional
resilience.

The lesson: experience doesn’t remove the pain of losses, but it can transform fear into respect. You still don’t
like drawdowns, but you no longer treat them as a sign your plan is broken. They become something you expect, plan
for, and work through.

Experience 2: The Entrepreneur Who Diversified “Too Early”

Taylor built a successful small business in their 30s. Almost all of their net worth was tied up in that one company.
As the business grew, so did Taylor’s confidence and their risk. A mentor finally asked a simple question:
“What happens to your life if this business hits a rough patch?”

That conversation sparked a decision. Taylor began slowly taking money out of the business and putting it into
a diversified portfolio of funds. At the time, it felt wasteful. Why move money from an enterprise that was growing
20–30% a year into boring index funds that might return “only” 7–10%?

A few years later, the industry hit a slowdown. Revenue growth stalled, margins were squeezed, and valuations for
similar businesses dropped. The company was still viable, but far riskier than it had looked at the peak.
Taylor watched paper wealth shrink but the diversified investments outside the business held up reasonably well.

In a sense, Taylor had willingly “lost” some upside by diversifying earlier. But they avoided the far more dangerous
outcome of having everything tied to a single, vulnerable source. They traded the chance at a bigger win for a much
lower risk of total loss. That’s another, very practical version of being willing to lose in order to win.

Experience 3: The Couple Who Defined “Enough”

A married couple in their 40s, Sam and Jordan, hit a point where their combined income and savings were finally
tracking toward a comfortable retirement. However, instead of relentlessly chasing the highest possible returns,
they did something unusual in a world obsessed with more: they sat down and defined what “enough” looked like.

Once they had a clear picture of their goals, they realized they didn’t need maximum risk to get there. They could
accept slightly lower expected returns by holding more bonds, more cash for emergencies, and a globally diversified
mix of stocks in exchange for a smoother ride and less anxiety.

Did they potentially “lose” some upside compared with a more aggressive all-equity portfolio? Yes. But they gained
something harder to measure: peace of mind and a higher likelihood of sticking with the plan through future
volatility. They were willing to sacrifice the possibility of the highest score in exchange for a very high
probability of actually achieving their real goals. In the game of personal finance, that’s winning.

A Wealth of Common Sense in One Sentence

When you strip away the noise, the charts, and the jargon, the big idea is surprisingly short:
Long-term investing success requires short-term discomfort. You do not get one without the other.

Being willing to lose doesn’t mean being reckless. It means:

• Accepting that volatility and drawdowns are normal, not errors in the system.
• Choosing a risk level that matches your real emotional tolerance.
• Diversifying so no single bet can ruin you.
• Sticking with a simple, evidence-based plan even when markets are scary.

That’s the “wealth of common sense” behind the phrase. If you want the rewards that come with owning productive
assets over decades, you have to be willing to look like you’re losing sometimes badly over months and years.
The sooner you make peace with that trade-off, the more likely you are to stay in the game long enough to actually win.