Doug Kass’s Marijuana Bet Gone Wrong

  • Mistakes are common for even the best investors.
  • The marijuana market is massive, but pot stocks have performed lousy.
  • Doug Kass’ post-mortem on his marijuana investing journey offers insight that stretches far beyond the cannabis industry.

One of the most difficult yet important tasks for any investor is objectively admitting when you’re wrong, changing course, and conducting a post-mortem analysis to reduce the risk of making the same mistake again.

That’s easier said than done. Admitting mistakes is tough. Financial pain hurts twice as much as gain, according to behavioral scientists. Take solace in knowing every investor, even those with decades of experience, will often be wrong. After all, investing in individual stocks is hard. The best investors are fortunate to produce positive returns on 50% to 60% of their stock picks.

Consider billionaire Jim Simons, the founder of the massively successful Renaissance Technologies’ Medallion hedge fund. His win rate was just 51%, yet his fund produced a compounded annual return of 39% after fees between 1988 and 2018. The decisions made in the fund were wrong 49% of the time, yet Simons produced awe-inspiring results that turned him into one of the world’s wealthiest and most lauded investors.

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