Scenario 1

Imagine, I come to you and made you two offers:

Offer A: You have a 50% chance of making $3300 and a 50% chance of losing $3300. Offer B: You have a 100% chance of making $2000.

Which will you choose? I reckon most people will choose Offer B. I probably would take Offer B.

Scenario 2

Now I come to you again, and again made you two offers:

Offer A: You have a 50% chance of losing $3300 and a 50% chance of losing $0. Offer B: You have a 100% chance of losing $2000.

I reckon most of us will choose Offer A.

Of course, not all of us will make the above decision eg. Choosing Offer B in Scenario 1 and Choosing Offer A in Scenario 2.

In fact, for many Singapore retail investors now, the above scenarios are very real.

In Scenario 1 …