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Avanir Pharmaceuticals, Inc. Message Board

  • andrewtsai89 andrewtsai89 Mar 6, 2013 1:07 PM Flag

    What we learned in advanced investment science today


    Just a curious question... 2 propositions. First one, guaranteed (100 percent chance) to win 1.25x invested, vs 90 % chance to win 2x and 10% chance to lose all. Which one would you choose?

    No right or wrong answer. I want insight on how old people think though.

    AT Stanford

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    • Good question.
      I think a very important point is how much the investment is in terms of one's net worth.
      If there is any chance of loss of capital, one should not bet more than they could afford to lose.
      Why? Because that leaves one in a financially desperate situation.
      So one needs to guarantee preservation of a comfortable amount of capital.

      Even if it were a small amount, though, I will take a guaranteed 25% gain in let's say a 2 year period over an investment with a 10% chance of losing it all.
      If you are talkiing about a 25% gain in a 10 year period, I can do better than that with high quality bonds which have only a 1% or less chance of default.

      You are aware, I trust, that financial advisors recommend that young people take more risks with their portfolio than old people. Just because it is harder for an old person to recover from a big loss than a younger person.
      I don't think young people should be taking big risks either because I think it is important to build the financial asset base over time.

    • Can't speak for how all old people think but this old person thinks you are a world-class #$%$.

      If you are a student at Stanford, I hold the Dumbledore chair of Wizardry at Hogwarts.

    • Please don't feed the trolls.