“In life, the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.” –Kwame Anthony Appiah
Winning, losing, offense, and defense
It’s often said that “playing not to lose is the surest way to lose,” so instead you should simply play to win. You’ve probably also heard the old adage that “the best defense is a good offense” – particularly in sports – but it has broad application across multiple facets of our lives, including our finances.
Incorporating these mantras into one’s financial strategy may not be intuitive, and if they are misinterpreted, the results could be disastrous. Today we’ll look at how we can play to win the game of planning and investing (and, yes, hopefully throw in some Alts for good measure). Here we go!
Winning by not losing
At first glance, “winning by not losing” and “playing not to lose” may sound like the same thing, but there is an important nuance between the two that is worth exploring. As mentioned previously, we view real risk as the permanent impairment of capital. Two common examples of that are:
- Investing in significantly overvalued and overconcentrated “shiny object” trades that evaporate and either fail completely or have massive price declines with no chance of ever attaining those high prices/valuations again.
- Panic selling (or forced selling) in a downturn that renders otherwise recoverable trades unable to wait out the recovery process.
“Winning by not losing” is a strategy to address both situations: First, constructing a diversified portfolio of reasonably valued investments avoids shiny objects and overconcentration. Second, given that same portfolio is built upon defensible long-term theses within a broader financial planning framework – where one knows what they own and why they own it (WYOWYO!) – volatility is accepted as part of the deal.
With the proper perspective, volatility is normal price fluctuation we accept as a trade-off for compounding our wealth over the long term. It is to be embraced wherever possible, as lower prices mean good companies are temporarily on sale. It pairs nicely with an abundance mindset.
Playing not to lose
“Playing not to lose,” on the other hand, sparks images of a scarcity mindset – avoiding price volatility at all costs, often due to conflating that volatility with risk. Here, investors may turn to excessive amounts of cash and/or quality bonds for “safety.” But that safety is an illusion. We only need to go back to 2022 for an enlightening example of this, as quality (Investment Grade) bonds returned ±15.6% that year, while interest rates rose. The far bigger issue, however, is that the same index has returned only 0.72% since 1/1/2022. After any amount of fees, that would easily be a negative return over what is now going on 4.5 years! The broader US Aggregate Bond index fared better in 2022 (-12.88%) but has recovered even more slowly.
In contrast, on the equity side of the equation, the S&P 500 was down over ±18% in 2022, but has since rebounded substantially, with a cumulative return of nearly 70%. The results, including a moderate 50/50 portfolio, can be seen in the table below more concisely.
| Index / Benchmark | 2022 Return | 1/1/2022-7/15/26 Cumulative Return |
| Investment Grade Bonds | -15.60% | 0.72% |
| US Aggregate Bond Index | -12.88% | -0.12% |
| S&P 500 | -18.32% | 69.66% |
| 50/50 Stock/Bond mix | -15.60% | 34.77% |
(Source: Tamarac AdvisorView. Bloomberg US Corp Investment Grade index as proxy for high-quality bonds, and 50/50 US Stock/Bond mix consists of 50% S&P 500 and 50% Bloomberg US Bond Aggregate as of July 15th, 2026).
To be fair, 2022 was an exceptional year – as it was the worst year ever for the US Aggregate Bond Index. And equity downturns are often far deeper and more drawn out than the 2022 example. Thus, the lesson from the above isn’t necessarily to not own bonds, but I do think it speaks volumes about the damage that attempting to hide from volatility can do.
What about income and inflation?
If an investor who has only been invested in bonds has also needed to draw an income from their portfolio, they are now an example of the permanent impairment of capital we dread. Adding insult to injury, we’ve needed almost 15% return since 2022 just to maintain purchasing power (you may have heard of inflation?), and that approach has resulted in a very unenviable position for those who were trying to play it safe.
A powerful sentiment shared by the great Nick Murray: a position of “no risk” does not exist; rather, you can only trade one risk for another.
Alts Perspective
In some ways, Alts can be helpful for those who seek lower volatility, but that should not be mistaken for lower risk. Some assets – e.g., private real estate, private equity, venture capital – inherently cannot be revalued and repriced daily (let alone by fractions of a second, like some publicly traded assets), so prices move more slowly. But disdain for (real or perceived) volatility alone should never be the basis for investing in Alts. Idiosyncratic risks of these investments, their managers, and their structures all have to be carefully considered. As with public markets, the objective to win by not losing can be pursued on the private side, and any investments should play a clear role with that in mind.
I have also seen the alternatives that (attempt to) play not to lose. Anecdotally, this includes many hedge funds and global macro funds that either overdiversified or hedged out so much volatility that they could not generate a reasonable return. In my experience, this often coincided with managers developing liquid alts strategies (via daily-liquid mutual funds) in the 2010s during the post-GFC zero-interest-rate (ZIRP) environment. You could easily find yourself paying a lot of fees for a lot of trading activity and little return.
Back to the question at hand
With elements that seem to be playing both offense and defense, financial planning helps us be proactive by first beginning with the end in mind, so we know what game we’re playing. From there, we can identify and address potential risks (playing defense) that may prevent us from reaching the goals we’ve set, while also constructing a forward-looking approach regarding the best way to get there. There are a variety of tools to facilitate that path from point A to point B: investments (including Alts), insurance, tax planning, estate planning and execution, etc. Note that some are far better than others.
The pursuit of maximizing returns vs. minimizing regret may often be at odds with one another. But to bring this full circle and definitively answer the question posed in today’s title (again h/t Nick Murray): it is far more important for us to minimize regret (via reaching our goals) than maximize returns, and that is the game we should be playing to win.
Until next time, this is the end of alt.Blend.
Thanks for reading,
Steve
