This “Longshot” Investing Strategy Makes Enormous Amounts of Money

This “Longshot” Investing Strategy Makes Enormous Amounts of Money

Posted On July 7, 2023 10:06 am

Several years ago, I tested a system of betting college football games against the spread.

Turns out that using small amounts of money betting on underdogs to beat the spread is a winning strategy.

The winning edge is small, and you must bet on every underdog, so you are making a lot of bets every week. You would change the odds if you tried to use large amounts of money.

Losing streaks can be brutal. If you lose, your recovery is zero dollars. The week is over every Saturday night, and all bets are settled in cash.

Betting on Sports Underdogs does work, and you can probably have a lot of fun with it if you are a bit of a gambler.

You will not, however, be able to make big money that can change your financial life by betting on sports dogs.

However, if we take the same math and logic and apply it to the stock market, we can make enormous amounts of money…

Let us address some caveats first.

The longshot approach should be done with a small percentage of your investable funds. I suggest no more than 10% for most people and a 20% cap for even the most aggressive investors.

You will not win all your bets.

If you win half of them, you will make enormous amounts of money over time.

On the plus side, there is no Saturday night reckoning. If you must hold the stock for months or even years to cash in for several times your initial stake, that is not a problem.

As long as the company does not go out of business or get taken over, the shares will trade every day the market is open.

You can own them for as long as it takes.

We are looking for asymmetric payoffs with this part of the portfolio – small bets and huge payouts when we are right.

What we want to do to make smart-long shot bets is look for companies with small market capitalization. That way, a relatively small amount of institutional buying can push the shares dramatically higher.

We want to favor lower-priced stocks. Speculators love low-priced stocks, and unexpected good news can bring in a fast and furious burst of buying that pushes our shares dramatically and rapidly higher.

We want to find companies with decent businesses in an industry with strong long-term growth potential.

We also want to limit our longshot purchases to companies where insiders and institutions have recently…

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