Invest
Psychology vs Probability
By Living Healthy, Staying Wealthy  •  November 18, 2009
[caption id="attachment_3280" align="alignright" width="150" caption="Photo by conorwithonen"]Photo by conorwithonen[/caption] When investing, ever wondered why most people take small profits instead of letting profits run and hold on to huge paper losses instead of taking a small loss early? A lot has to do with the human psychology towards money. Our rational mind knows probability, but our sub conscious mind knows emotions like fear and greed. Which one prevails will determine your approach to investing and your overall success. Which would you choose: Option 1: A sure win $700 bet Option 2: A bet for 75% chance for $1000 with a 25% chance of losing everything If psychology of fear prevails, you will take the $700 bet because it means assured immediate profits in the pocket. However, the rational mind knows the probability of the expected outcome for option 2 is $750, a potentially better outcome. Another choice: Option 1: A sure lose $200 bet Option 2: A bet for 75% chance to lose nothing with a 25% chance to lose $1000 Read more...
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By Living Healthy, Staying Wealthy
Aaron Lau is a Independent Financial Adviser licensed by the Monetary Authority of Singapore to provide financial advice to individuals in Singapore. The main reason he is in the Financial Advisory industry is to share what he has learned after studying and comparing the various insurance and investment instruments in the market. He strongly feels that proper, quality financial planning is important to all individuals and sincerely would like to reach out to help as many as possible.
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