The Bullet Hole Story: A Lesson in Seeing the Unseen

Are You Only Seeing the Bullet Holes? Rethinking Investment Risk with Sterling Edge Financial

Picture the image above: a WWII fighter plane, its wings and tail riddled with red bullet holes. At first glance, the solution seems obvious—add more armor where the damage is. But what if that’s exactly the wrong lesson?

This is more than a quirky story from history. It’s a wake-up call for anyone serious about protecting their financial future. If you’re managing your investments based on what’s visible, popular, or “common sense,” you might be missing the most important risks of all.

The Bullet Hole Paradox: What Are You Not Seeing?

During WWII, Allied strategists mapped out where returning planes had been hit. The wings and tail were peppered with damage, so the plan was to reinforce those areas. But statistician Abraham Wald saw what others missed: these were the planes that survived. The ones hit in other places—like the engine or cockpit—never made it back. The real vulnerabilities were the spots with no bullet holes on the surviving planes3.

This insight is called survivorship bias—focusing on visible winners while ignoring the silent stories of failure238. It’s a cognitive trap that can lead to dangerously flawed decisions, especially in investing.

Survivorship Bias: The Silent Saboteur in Your Portfolio

Think about the last time you saw a chart of top-performing funds, or heard a friend brag about their latest stock pick. The stories you hear are about the “survivors”—the funds that made it, the stocks that soared. But what about the funds that quietly closed, or the investments that fizzled out? They’re missing from the data, just like the planes that never returned2348.

This bias can:

• Overstate past performance: By ignoring failed funds or stocks, average returns look much better than reality234.

• Underestimate risk: If you only see what survived, you miss the true volatility and downside of a strategy28.

• Create false confidence: You might believe certain approaches are safer or more successful than they actually are, leading to riskier choices38.

In short, survivorship bias can make you think your financial plan is bulletproof—when it’s actually exposed in all the wrong places.

Are You Protecting the “Engine” of Your Financial Life?

It’s easy to focus on what’s visible: fees, recent returns, or the latest investment trend. But are you asking the deeper questions?

• Where are the real risks in my financial plan—the ones I can’t see?

• Am I only patching the “wings,” while leaving my financial “engine” exposed?

• How would my portfolio hold up if the market took a hit in an unexpected way?

• Am I relying on stories of success, or do I truly understand the risks that could take my plan down?

Most investors don’t realize their blind spots until it’s too late. The dangers aren’t always where everyone else is looking.

Beyond the Obvious: Why You Need a Thought Partner

Avoiding survivorship bias isn’t just about reading more data—it’s about seeing the whole picture. That’s where Sterling Edge Financial comes in.

Our approach:

• Uncovers hidden risks: We help you look beyond the headlines and success stories to find the vulnerabilities in your plan238.

• Focuses on what matters: We don’t just chase the lowest fees or hottest funds—we help you protect the “engine” of your financial future.

• Builds resilience: We design strategies that prepare you for the risks you can’t see, not just the ones everyone is talking about.

Ready to See What You’ve Been Missing?

If you’re only looking at the bullet holes, you’re missing the real story. Don’t let survivorship bias steer your financial future off course.

Ask yourself: Are you truly seeing all the risks—or just the ones that made it home?

If this has you rethinking your approach, let’s talk. Sterling Edge Financial specializes in helping clients uncover hidden risks and build plans that stand up to whatever comes next.

Contact us for a no-pressure conversation. Let’s make sure your financial “engine” is protected—so you can keep flying, no matter what comes your way.

Disclosure: This content is for informational purposes only and is not investment advice. Investing involves risk, including the potential loss of principal. Please consult a qualified financial professional before making any investment decisions.