The Hunt for Asymmetry

Why the best investors focus on this one powerful thing...

Ever notice how some people seem to win big while taking surprisingly little risk?

That's not luck. It's asymmetry in action.

I've been thinking about this a lot lately. In a world obsessed with "no risk, no reward," we're missing something crucial: not all risks are created equal.

Here's what I mean.

Most investors get it wrong from the start.

They think about risk and reward like a balanced scale. Put in X amount of risk, get Y amount of return. Simple math, right?

Wrong.

The real magic happens when you find opportunities where you risk X but potentially get 10Y... or even 100Y in return. And here's the kicker – your downside is still limited to X.

That's asymmetric investing.

As Warren Buffett noted in his 1997 letter to shareholders:
"The most that can be lost in a stock is 100% of the amount invested, while the upside could be multiples of the original investment."

But here's what most people miss:

The best asymmetric opportunities often look terrifying at first glance. These are the moments when most investors freeze up, when headlines scream danger and every instinct tells you to wait for more certainty. That's precisely what makes them valuable.

Think about March 2020. Markets in freefall. Panic everywhere. Yet quality companies were trading at once-in-a-decade valuations.

The downside? Maybe another 20-30% drop.
The upside? A double or triple over the next few years.

That's the kind of asymmetry you want to find.

---

So how do we spot these opportunities?

The best asymmetric bets often appear in three situations:

1. When fear creates opportunity
   Markets occasionally offer up great businesses at exceptional prices. Not because anything is fundamentally wrong, but because sentiment has turned negative.

2. When complexity hides value
   Sometimes great opportunities are simply hard to understand. The work required to gain clarity creates the asymmetry.

3. When time horizons differ
   The market's obsession with the next quarter can blind it to value that takes years to realise. Your willingness to wait is your edge.

The key is being ready to act when these situations arise. Most investors know what to do; few have the conviction to do it when it matters.

---

---

The Real Secret:

You don't need to make asymmetric bets often. You just need to:

• Stay liquid

• Stay patient

• Stay ready

As Howard Marks writes:
"The goal is to find situations where if you're right, you make a lot, and if you're wrong, you don't lose much."

Most investors chase what looks safe. They crowd into the same trades, the same stories, the same strategies.

But real asymmetry lives in the shadows – in situations too messy, too complex, or too scary for most to touch.

Then, when the odds are greatly in your favour, bet heavily.

---

Before making any investment, ask yourself:

1. Which positions have truly limited downside?

2. Where do you have multiple ways to win?

3. Which bets could return 5-10x if you're right?

If you can't answer these questions, you might be playing the wrong game.

---

Bottom Line:

Investment success isn't about being right all the time.

It's about finding situations where:

• Being wrong doesn't hurt much

• Being right changes everything

The beauty of asymmetric investing is that you don't need to be right often. You just need to be right on the ones that matter.

Until next week,
Schwar Capital

---

P.S. If you found value in these ideas, consider sharing this newsletter with other thoughtful investors. The best asymmetric opportunity might be the compound effect of growing this community together.

---

Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. The opinions expressed here are those of the author and do not necessarily reflect the views of Schwar Capital. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The author may or may not hold positions in the stocks or other financial instruments mentioned. Always do your own research or consult with a qualified financial advisor before making any investment decisions.