Hero or zero: outcome bias and bet size

Hero or zero is just a matter of outcome.

Imagine you are in the hot seat making a buy or sell call after a sharp market fall. You have no idea what happens next.

It reminds me of a talk I heard during a Wealth Management Institute course on philanthropy. The speaker shared how he hiked the Kepler Track in New Zealand with his three children. The rain was terrible and the wind was worse. Their safety depended on a rope tied to each child, and the wind posed real danger. He had to choose whether to carry on or turn back. His youngest pleaded not to go on.

What is outcome bias?

Everyone loves a good story.

All was well, and the memories stayed. His children can recall Kepler whenever they face challenges in life. But during the break I shared my own thoughts with other participants. Yes, he is a hero based on the outcome. It could just as easily have been a zero if a mishap had happened. You can imagine the social media comments: "You knew the risk and you still put your kids in danger? What were you thinking?!"

Why position size matters as much as being right

If you re-mortgaged your paid-up house to take a leveraged position and buy the dip, the stakes are certainly different. Markets reverse up and you are a hero. If markets keep falling instead, you are a zero. Hero or zero is just a matter of outcome.

I would not have risked my children and put them in the way of potential danger. Yes, a valuable learning experience would have been denied. But I think there are other ways to reach the same learning.

It is the same with markets. People love the big bet against the odds that wins big; it makes a fantastic story. More often than not, professional risk management sets a bet size that will not cripple the portfolio if the bet goes wrong. Deciding in advance what a holding needs to earn, and who makes the call when markets move, are part of that discipline. After all, rain or shine, the market will always be there, and opportunities will present themselves again. Why turn this into a hero or zero moment?

Questions

What is outcome bias in investing?

Outcome bias is judging a decision by its result rather than by the quality of the reasoning and information at the time. A lucky call can look skilful and a sound one can look foolish.

What is position sizing?

Position sizing is deciding how much of a portfolio goes into any one holding or trade, so that being wrong on it is survivable.

First published on isaacfang.com on 15 October 2025. The opening market example has been removed so the piece does not date. Lightly edited for this site.