Asymmetric risk-reward

Asymmetric risk-reward — a bet whose realistic upside is a multiple of its realistic downside. This course’s filter: demand roughly 3:1 or better before capital moves, and a survivable downside no matter the ratio. Most loudly-sold products are the opposite — capped upside, uncapped downside (the coupon is the best case, the principal is the worst). Foreclosures bought at 60% of value and businesses where your effort multiplies equity are where genuine asymmetry lives in this course’s later levels.

First used in: 1.8 · Risk: what you’re actually paid for