…fear ourselves
Why? Surely if anyone is on our side it’s by definition US!
Sadly, any addict and many love songs prove otherwise, also with investing there are a number of ways we’re our own worst enemies.
Gambling
Is investing gambling?
Is Investing Gambling?
People frequently say that investing in the stock market is just gambling.
– Is that true?
– Would it be good if that were true? Let’s find out.
– Is that true?
– Would it be good if that were true? Let’s find out.
Lucky Lottery Losers
How could it be lucky to lose the lottery?Wouldn’t it be a good thing though, since most of us lose???
The Tax That You Ask to Pay
Usually, people want to avoid unnecessary taxes–except for one. That one they line up to pay, even though it’s a voluntary tax. Stranger yet, people think paying this tax makes them money. What strange, upside down world am I talking about?I Declare War on Powerball
Why am I doing this?
- Do I want to keep people from winning?
- Don’t I realize it’s harmless?
Powerball: Threat or Menace?
How should we think about Powerball?
- Harmless indulgence?
- Best option for retirement?
- Self destruction 2 bucks at a time?
- At least it helps the schools?
- Preys on the poor?
Shouldn’t Investing be Fun?
Should investing be fun or a grim, relentless, chore?
There’s a lot at stake depending on how we answer:
- If it’s unpleasant, maybe we won’t do it.
- If it’s fun, maybe it’s a waste, like lottery tickets.
The Smart Penny #2: Coins that Predict the Future
By the end of this post, if you aren’t convinced, I’ll sell you my “smart penny” which correctly predicted whether a stock would go up or down for ten days straight. If you buy the penny, which I will try very hard to persuade you not to do, I’ll get a new batch of pennies and start flipping, If I have about a thousand pennies, one of them is likely to “predict” ten stock results, just by the law of averages.
The Smart Penny #1: The Gambler’s Fallacy
If you flip a coin and get heads 4 times in a row, the next flip is likely to be tails, right? That reasoning, which often makes intuitive sense to us, is dead wrong. We start from something true: coin flips tend to average out to half heads, half tails. If you jump from that to assuming that past coin flips affect future ones, you’re implicitly saying that the coin remembers and acts.
Two Ways to Lose When It’s Easier to Win
With the stock market returning, on the average, about 10% a year, it seems extremely easy to make money. There are two ways to lose though, and both are very popular. As Martin Luther said, “human reason is like a drunken man on horseback: set it up on one side, and it tumbles over on the other.'” Many people in each generation distrust the market and refuse to “gamble” with their money. That lasts for a long time, but after it becomes extremely obvious that others are making money, the distrustful give in and buy whatever just went up in price, only to see it go down, whereupon they sell, locking in the loss, and convincing themselves that they were right to be distrustful.