The world does not run on absolute certainty, yet the strategic decisions we choose affects future outcomes somehow. The irony seems amplified with those who understand little toward statistical expectancy. Having adequate grasp of this subject makes a more informed investor for any business or personal desires.

The concept is simple.

E = Expectancy

P(w)= Probability of winners

S(w)= Average winner Size

P(l)= Probability of losers

S(l)= Average loser size

E = [P(w)*S(w)]-[P(l)S(l)]

E.g. let’s look at New Zealand finance companies. They pledge to provide retail investors a slightly above the government bond interest rate as long as their own investments do not experience corrections or draw-downs. Historically speaking, credit markets have a positive correlation to the general economy, and the world has experienced at least 2 years of recession each decade, or 2 out of each 10 years. From this we can conclude that these companies will not end every single year profitably.

I.e. the rough probability of a losing year is then 2/10=0.2 or 20%, and the probability of them ending each year profitably stands at 1-2/10=0.8 or 80% at best. They offer retail investors annual rates of roughly 9.x% (I’ll round it up to 10%) in the years they make performance targets, and in a bearish year the average investor looks to take a loss of 30% to 70%, averaging 50%.

So can the average retail investor “expect” to profit over the long run using these companies?

Probability of a profitable year: (80% or 0.8)

Average investor profit: (10% or 0.1)

Probability of a bad year: (20% or 0.2)

Average investor loss: (50% or 0.5)

E= (0.8)(0.1)-(0.2)(0.5)

E=0.08-0.1

E= -0.02

A negative expectancy suggests a net loss will likely occur in the long run. In fact the average roulette player has a less negative expectancy than the above; in other words you would likely lose less money playing roulette at the casino than investing with the finance companies.

To make profit or receive greater reward consistently, you need the odds on your side. Having a positive expectancy remains one of few ways to verify that. So learn the math, and make wiser decisions.

Continue reading this post…

Collecting watches have become a growing hobby with many around the world today; their beauty and timeless elegance attract both the young and elderly alike. The quality of some brand name vintage watches makes them indestructible and thus the collection can be passed on from generation to generation.

However there are many deceptive people out there that know authentic vintage watches are very hard to come by and at times manage to duplicate or fraud some into buying one. Here are a few points, which hopefully will help you always purchase an authentic vintage watch.

Get to Know What Makes a Vintage Watch

Every single watch brand has its own specifics through which it is more or less unique such as a marking in the inside mechanism or a piece of jewelry on a particular part of it or the type of movement and so on. Getting to know what makes a particular vintage watch special will help you be able to tell the difference between the fake and the authentic version. There are many instances when vintages watches have been swapped around for example, a different movement in a vintage case and if you are not familiar with the same you will not know what to look and/or ask for.

Replacing is a big industry and some don’t stop at the pieces you cannot see, they will even go up to replacing pieces such as the worn hands of a vintage watch with something old but not its authentic piece. Again the only way to tell the difference is to be very familiar with what the original should look like.

Where to Look for Authentic Vintage Watches

To gather knowledge about a particular vintage watch you should look on the internet where everything will be listed in detail; you may even be able to get in touch with the company if it still exists and ask them for other signs that will give away an inauthentic vintage watch.

Vintage watches are very expensive and once you have purchased it, it may be difficult to return it on the charge that a piece was replaced as the seller can blame you for the same. Therefore, prevention is always better than cure and you should take all possible measures that you possibly can especially if you are a collector and are looking forward to expand your collection.

Continue reading this post…

How can you learn to invest money? Well you could sign up for some expensive courses and hope to learn some special secret investment tips that will make you rich overnight. Unfortunately learning to invest money is not that easy. The tried and tested method to success is often a lot cheaper but more time consuming.

The first choice you need to make is how much time and money you have free to invest your money in. Obviously if you are short on time then trying to research and learn a completely new area of investing (for example futures trading). Instead you may be better of simply investing in a fully managed investment fund.

Obviously you should only invest money that you can afford to lose. If you cannot afford to lose the money you are planning to invest then you should seriously consider the riskiness of the investments you will make. If you cannot afford to lose the money then very low risk such as savings deposit account or a government bond may be the best option. On the other hand if you have spare cash kicking around that you can afford to lose and don’t know what to do with it then maybe investing in shares in the latest in fad technology stock may be the right investment for you.

The easiest way to learn to invest money is to simply read around the subject. The more you read, the more you’ll learn. The more you learn, the better investment decisions you’ll be able to make.

Continue reading this post…

I have heard it said that in a bubble, the price of the hot item affects the economy more than the economy affects the price of the hot item. While this was true during the past two bubbles (internet/technology stocks of the late 1990′s and early 2000 and housing) does this hold up with the current sector shift into commodities? Could we be witnessing the formation of the next bubble?

Before we get ahead of ourselves, it is a good idea to determine what classifies a “bubble.” A bubble can be loosely defined as when excess resources, capital and financing are being poured into a specific hot investment as compared to other capital investments. There are differing types of bubbles, but James Montier did a good job of categorizing them:

1. Greater fool theory – higher prices are willing to be paid as long as there is someone else to buy it from them – speculative
2. Fundamental analysis – investors err by extrapolating that past returns will continue indefinitely into the future
3. Fads – investors succumb to pressure to conform to the majority’s view (social and psychological factors)
4. Informational – prices deviate from the fundamentals because investors assume they have hidden information that supports higher prices

Additionally, if you take a look at both of the most recent bubbles mentioned above, you can see a consistent pattern emerging from their formation to the eventual bursting:

- Bubbles usually start because of rotational investment shifts; investors seeking “the next big thing” move money into these investments in an attempt to improve returns

- Hype and over-promotion become rampant

- The word “new” is usually always bandied about by the pundits and used by investors to rationalize why this time is different than the past

Continue reading this post…

Many people don’t even try to learn to invest money because they think they are unable to afford to invest and that investing is purely for the rich who have nothing better to do with their money. This however is usually not the case. Below are a number of ways you can free up income that can be invested for the future.

It is estimated that over 50% of mobile phone users are on the wrong tariff. Do you use all of your monthly call allowance? People are often drawn to sign up for the more expensive tariffs that are offered with the latest all singing, all dancing handsets when in reality it would often prove much cheaper to opt for a much cheaper tariff and simply buy the handset separately. If you can trim just £20 per month off you mobile bill then straight away you have freed up £240 per year to invest.

Utility bills can also offer the chance to cut down your monthly outgoings. By turning down your heating thermostat by just one degree can save you as much as £50 throughout the year.

Other tips include turning the lights off when you leave the room, only filling the kettle with the amount of water you want to use. Washing your clothes at 30 degrees as opposed to 40 or higher is another idea now being publicised by washing powder manufacturers.

Other ways to save may be to make your own lunches and coffee at work. Four cafe bought coffees a day from one of the big chains at £2 each works out to £480 over a working year!

All of these things mentioned above sound small on their own however you only have to do a few sums to see that if you do all of them you can save considerable amounts of money with which you can then invest.

Continue reading this post…