In the fast-paced world of stock investing, there’s a myth that continues to mislead both aspiring and active investors — the idea that you need to be right most of the time to succeed. For many beginners in Nigeria and across the globe, this belief creates unnecessary pressure and, ironically, leads to more losses than gains.
But here’s a liberating truth: you don’t have to be right all the time. In fact, some of the most successful investors are wrong nearly as often as they are right. What sets them apart isn’t their prediction accuracy but how they manage their wins and losses.
Let’s break down this powerful but often overlooked principle.
Why Accuracy Isn’t Everything in Investing
It’s easy to assume that great investors possess a near-magical ability to forecast stock movements. From flashy news segments to social media stock influencers, the illusion is constantly reinforced: if you just pick the right stocks, you’ll win big.
But the stock market is influenced by a wide range of unpredictable factors — global economics, company news, political instability, natural disasters, and even investor emotions. No matter how much analysis you do, you will sometimes be wrong.
Even top-tier fund managers and investment professionals with access to elite research and data rarely get it right more than 55–60% of the time. So how do they consistently grow wealth?
The answer lies in their risk management strategy and the power of asymmetrical returns.
The 50/50 Strategy That Wins Big
Imagine you make 100 trades. You’re correct on only 50 of them — that’s a 50% success rate. It doesn’t sound impressive, does it?
But now consider this:
- On your 50 winning trades, you earn an average return of 20%.
- On your 50 losing trades, you limit your loss to 5%.
Now let’s do the math:
- 50 wins × 20% = +1,000%
- 50 losses × 5% = -250%
Your net gain is 750%, despite being wrong half the time.
That is the power of cutting your losses and letting your winners run. It’s not about being right more often — it’s about making more when you’re right and losing less when you’re wrong.
The Tools That Make It Work: Risk Management
So how do you practically apply this strategy? It boils down to a few disciplined habits:
1. Use Stop-Loss Orders
A stop-loss is an automatic trigger that sells a stock if it falls below a certain price. This protects you from large, unexpected losses. For example, setting a 10% stop-loss means that no single trade can lose more than 10% of its value.
In the Nigerian market where volatility is common, a stop-loss strategy helps investors avoid emotional panic during downturns and maintain long-term focus.
2. Control Position Size
Not every investment deserves equal weight in your portfolio. Allocate more funds to high-confidence, low-risk stocks, and reduce exposure to speculative or high-risk plays. This ensures that even if a risky trade fails, it won’t damage your entire portfolio.
Think of your investments like a football team — you wouldn’t let every player take penalty kicks. Similarly, your strongest stocks should carry more responsibility in driving returns.
3. Let Profits Run
Many investors make the mistake of selling winning stocks too soon, locking in small gains out of fear that the stock might drop. But great returns often come from stocks that grow exponentially over time.
If a stock is performing well and the fundamentals remain strong, consider holding it longer. Compound growth is the secret weapon of long-term investors.
Emotional Intelligence: The X-Factor
While numbers and tools matter, the hardest part of this strategy is emotional discipline. Selling a stock at a loss can feel like failure. Holding a winning stock while it fluctuates can create anxiety.
But investing isn’t about being right — it’s about growing wealth. And that often means accepting small, controlled losses in exchange for larger, calculated wins. Think of losses as business expenses. They’re the cost of playing the game — not something to fear or avoid at all costs.
As legendary investor Paul Tudor Jones once said:
“I’m always thinking about losing money as opposed to making money. Don’t focus on making money; focus on protecting what you have.”
The goal is not to avoid losses altogether — that’s impossible. The goal is to minimise them and make sure your winners are strong enough to lift your entire portfolio.
A Lesson from Warren Buffett
Warren Buffett, one of the most successful investors in history, famously said:
“Rule number one: never lose money. Rule number two: never forget rule number one.”
Now, no investor — not even Buffett — follows this rule literally. The essence of his advice is about capital preservation. Protecting your capital gives you the freedom to keep investing and take advantage of future opportunities.
This mindset is especially relevant for Nigerian retail investors navigating a market that can be unpredictable due to political and economic uncertainties. By embracing controlled losses and protecting capital, you stay in the game longer — and give yourself more chances to win.
Conclusion: It’s Not About Perfection — It’s About Process
To succeed in stock investing, don’t chase perfection. Don’t fall into the trap of thinking you need to be right all the time. That mindset creates stress, breeds overconfidence, and often leads to poor decisions.
Instead, focus on building a system that:
- Limits losses
- Maximises gains
- Controls risk
- Manages emotions
Being right 50% of the time is more than enough — if you are smart every time.
In the Nigerian stock market or anywhere else in the world, this approach can turn average traders into long-term wealth builders. Remember, consistency and discipline are your greatest assets — not clairvoyance. So the next time you make an investing decision, ask yourself: Am I trying to be right, or am I trying to be profitable?
