Dear Young Investor,

I hope this letter finds you well.

So far, in our journey together over the past few months, I’ve shared my thoughts on building the right money habits, learning to deal with fear, avoiding money traps, and a few essential steps to lay the foundation for a successful financial life.

Today, I want to hand you a tool, one that has saved me more times than I can count. It’s called ‘inversion.’ And I believe, with all my heart, that if you really understand and apply this mental model, it will save you from the kinds of investing mistakes that don’t just hurt your portfolio but also bruise your confidence.

Let me begin with something Charlie Munger, the business partner of Warren Buffett and one person I look up to the most, once said:

Now that sounds like a dark joke, but beneath the humour lies a mental model that has stood the test of time: invert, always invert. The idea is simple. Instead of asking “how do I succeed?”, ask “how do I fail?” And then, don’t do those things.

This may sound too obvious, but believe me, very few people actually think this way. We’re so conditioned to chase the right answers, to look for hacks and secrets to success, that we forget how powerful it is to just avoid doing something stupid. Inversion helps you spot stupid. Before it happens. And that’s a big deal in investing, where avoiding big losses matters more than hitting upon big winners.

When I look back at my early investing years, I realise that most of the mistakes I made were not because I didn’t know enough, but because I didn’t pause to ask what could go wrong. I didn’t invert the decision. I bought companies I didn’t understand. I ignored red flags. I didn’t think in terms of downside. I only thought about upside. And guess what? I paid the price. Sometimes in money. Often in regret.

Inversion helps you change the question. So instead of asking, “What stock should I buy to make 10x returns?” ask, “What kind of stock can destroy my capital?” And then, don’t touch those. Instead of asking, “How do I time the market perfectly?” ask, “What behaviour causes people to lose money in the market?” and then avoid that behaviour.

So, what does that look like in practice?

Let’s say you’re analysing a company. Everyone around you is excited about it. You’re tempted. Instead of jumping in, try inverting: “What would have to go wrong for this investment to fail?” Maybe the debt levels are high. Maybe the promoter history is shady. Maybe it’s in a cyclical industry and you’re buying at peak earnings. These aren’t red flags to stop you necessarily, but they’re signals to be cautious. Inversion slows you down. And sometimes, slowing down is what saves you.

And it’s not just useful with stocks. Inversion works equally well when investing in mutual funds. Let’s say you’re looking at a mutual fund that’s been topping the performance charts. Everyone’s talking about it, and you feel that familiar itch to jump in. But before you do, try inverting: “What would have to go wrong for this mutual fund to disappoint me badly?” Maybe it’s taken concentrated bets in overheated sectors. Maybe the fund manager has recently changed, and the performance track record no longer reflects the current decision-maker. Maybe the fund’s size has ballooned, making nimble investing harder. Or perhaps the recent returns have come from a rising tide rather than true skill. These aren’t automatic deal-breakers, but they are caution signs. Inversion helps you step back and ask better questions. And sometimes, that pause is what keeps your money safe.

Here’s another example: FOMO or the fear of missing out, which is one of the most dangerous emotional traps in investing. When a stock you never heard of suddenly goes up 50% in a week, your brain screams, “Get in before it’s too late!” But let’s invert. “What has to be true for me to lose money by chasing this now?” And suddenly, you realise, maybe it’s already overpriced, maybe you don’t understand the business, maybe you’re relying on momentum with no margin of safety. Thinking backwards helps clear the fog.

Inversion also helps in asset allocation. Instead of asking, “How do I maximise returns?”, ask, “What asset allocation will protect me from blowing up?” That question leads you to diversifying, to building cash buffers, to not being overexposed to one sector or geography. It leads you to build resilience rather than chase optimisation.

And you can go even broader. “How do investors usually fail?” Let’s make a list.

• They use leverage they don’t understand.
• They ignore valuation.
• They follow the herd.
• They invest emotionally.
• They don’t track expenses or savings.
• They have no emergency fund.
• They buy in euphoria.
• They sell in panic.
• They mistake noise for signal.
• They bet on stories without substance.
• They don’t do their own thinking.

It’s a long list, I know. But just avoiding a handful of these mistakes can take you much farther than you think.

The beauty of inversion is that it’s not about being pessimistic. It’s about being realistic. It’s not anti-success, but pro-survival. And in investing, survival is underrated. Everyone wants to double their money. But no one talks about just staying in the game long enough to let compounding do its quiet magic. Inversion helps you stay in the game.

When I sit down to make any investing decision now, whether to buy or sell a stock or a mutual fund, or rebalance my portfolio, I try to ask myself: “What assumptions am I making here that could be wrong?” That’s also inversion. It keeps me honest, and reminds me that I’m not as smart as the spreadsheet says I am. And that humility is the real gift of inversion.

You can also apply inversion to your career. Ask yourself, “What kind of decisions will leave me financially trapped 10 years from now?” Maybe it’s taking on lifestyle debt. Maybe it’s staying too long in a comfort zone. Maybe it’s avoiding learning new skills. The power of inversion isn’t limited to finance. It’s a way of thinking that cuts through illusion.

Now I know what you might be thinking: “But won’t thinking about what can go wrong all the time make me too cautious?” Good question. The answer is: only if you let fear paralyse you. Inversion isn’t about inaction. It’s about informed action. It’s about being aware of risks so you can design around them, not avoid life altogether. There’s a big difference.

If I had to distill everything I’ve learned so far in my investing journey into one idea, it would be this: more than brilliance, more than speed, more than luck, it’s avoiding stupidity that compounds. And stupidity often shows up disguised as confidence. Inversion helps unmask it.

So, the next time you’re excited about an investment, or feeling left out, or tempted to go all in, pause. Ask yourself: “What could go wrong?” “What am I not seeing?” “How could this fail?” And then let those answers guide your next move. Not to stop you, but to strengthen you.

Remember that in a world obsessed with finding the right answer, sometimes the smartest move is to avoid the obvious mistake. That’s inversion. It may not seem exciting, but it will make you a better investor.

And that, my dear friend, is the kind of thinking that lasts.

With less brilliance, and more clarity,
Vishal

This article is authored by Vishal Khandelwal of safalniveshak.com, an initiative to teach investors how to make simple and wise investment decisions.

Also Read:

• Letter to A Young Investor #11: The Warrior’s Way
• Letter to A Young Investor #10: The Most Important Thing That Counts in Investing
• Letter to A Young Investor #9: Live Your Questions
• Letter to A Young Investor #8: Beware the Money Trap
• Letter to A Young Investor #7: The One Financial Step You Can’t Skip
• Letter to A Young Investor #6: A Powerful Habit That Changes Everything
• Letter to A Young Investor #5: You Stand Alone
• Letter to A Young Investor #4: The Art of Waiting
• Letter to A Young Investor #3: The Quiet Wonder
• Letter to A Young Investor #2: The Money Manual
• Letter to A Young Investor #1: The Philosophy of Wealth