Intelligent Investing
Lesson from Investing Scam
Get rich quick schemes are the hot topics these days. When encountering such news, most investors tend to convince themselves "I wouldn't have fallen for scams like these" and brush it aside. But the fact is, greed knows no boundary. Just as how others managed to convince themselves to get into these get rich quick schemes, we can just as easily fall under our own spell when trying to buy that uptrend stock. Here are a few ways to stop our cocaine brain.
FOMO
Fear of missing out is the driving force that promote greed and envy plays a huge part in it. We look at how others are earning more as we got left behind. We managed to talk ourselves out of it but succumb to the temptation on the last minute by suppressing our fear. Our fear of missing out wins over the fear of losing money. It is not easy. But when you find yourselves highly emotional when making decision, it is best to stop and step away from it until you can think rationally.
Peer effect
Whether it is a scam or stocks, we don't operate in isolation but influenced by our environment. It is like when you are in a group and all your friends start doing something, there's a huge pressure to confirm with the majority and follow them because you don't want to be the odd one out. Learning how to think independently and make decision is the key.
Inferred probabilities
If someone offered you 20% monthly return with a chance of turning a $10k investment into $24k in 12 months, should you go for it?
Here we can use decision tree probability. See chart. Here if you don't invest, the payoff will be $0. If you invest, and if it fails, you lose $10k; if it succeed, you get $24k plus your initial capital. So two outcomes if you invest. (p) is the probability. If the probability of succeeding is (p), that means the probability of failing is (1-p) because probability for both outcomes has to add up to 1. So you put in the equation, work that algebra, and you realize whoever that's offering you is telling you that there's a minimum 29.4% chance of this investment succeeding. Now you have a figure, a starting point to think rationally instead of base on intuition.
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6 people like this. Showing 50 of 50 comments
They won't learn because they thought they were bad luck only. They promised themselves to get in fast next time.
2017-04-29 19:36
this is a very very useful information..thanks Ricky.
i have a question which you may be able to answer to verify my understanding.
will post in a minute
2017-04-29 19:41
Say now PetronM Mother share is trading at 6.80 and the CB is trading at 0.385, i.e there is no premium for simplicity.
Now if the perception is that the Mother's price will either:
(i) gain 20%, or
(ii) in worst scenario drop by the same 20% before the CB' expiry
can we say the rationale is 27% minimum chance for you to succeed by investing on CB?
(assume CB always follows the mother's price movement with exact zero premium)
2017-04-29 19:53
Petron CB = (Mother's Price - 4.50)/ 6
Of course the most difficult factor to put into the equation is the perception itself that you will gain . i.e the reliability of that someone offering you that you will obtain 20% monthly return....the whole decision relies on the odds of this guy telling you the truth...we cannot put that into the probability equations..he he
2017-04-29 19:58
In the above scenario, you are then assuming the probability of the person telling you the truth is 50%....
Guess this maths is more applicable in shares trading than people as the odds of future price movement in shares is not influenced by its current price ...unlike humans personality.
2017-04-29 20:05
Say the odds of the positive outcome (based on the trust level you have) is 70% instead of 50%...you can then multiply the gain side of the equation with 0.7 and then 0.3 on the negative outcome. This way you may uplift the rationale figure from 29% to higher than 50%...and justify your decision to go for the investment.
Many 'superinvestors' uses charity to gain trust on the words they say...
2017-04-29 20:39
why r there so many fools in msia? know that place got tiger or loin still wanna put hand inside the cage n let it bite. money game already know sure can close yet people invest.is like invest in gonna be expired warrants, wanna buy stuffs need to see the date also otherwise bought expired goods
2017-04-29 20:51
;-), if no fools, how superinvestor in this world win big? Untuk direnung & difikir ...
2017-04-29 21:10
it all depends on:
i) odds of the positive outcome versus negative outcome, and
ii) the magnitude of gain on positive outcome and the magnitude of loss via the negative outcome...
your decision depends on the 4 variables above.
its only stupid to make a decision without considering the above factors...it can also certainly turnout to be smart decisions.
again it all depends on the value of the variables we use..
some like stockman can never understand this maths.
2017-04-29 21:14
one of the ways chances u cannot lose,never buy stocks higher than those who recommend u to buy.all direcotrs,superinvestors only recommend people to buy only when they bought at a much lower price. they only keep quite when they stuck at high price.one should only be buying when this kinda sharks lose.example if they recommend a stock at 1.00,don't even chase that stock at higher than the price they buy. buy when it down to 80cts or below
2017-04-29 21:29
those who recommend u to buy at below their buying price is only consider your good fren, those who call u to buy at a higher price is a crook
2017-04-29 21:30
This apollo dude is sounding more n more like a tin kosong...tong tong tong...ah but only sh*t came out of his mouth...you want talk crap go elsewhere..i3 dun need you.
2017-04-29 21:44
In case you dunno,this is the real world..not paradise where your mother will spoon feed you everythig.Diu!
2017-04-29 21:45
I suggest apollo can go to subang parade starbulks to drink coffee with cpteh n talk for hours...i hv a feel u two can b good buddy...
2017-04-29 21:47
just now I went to a club, a fren showing to me his CDS a/c consisting of over 20 stocks, he told me in 1990s he invested almost 200k now only about 50k. the portfolio consists some I remember igb,mfcb,keck seng,amprop,fap,skw,insas,menang,guh,ta,iwcity,pesona,datuk keramat,mphb,perstima...etc. he told me that if he invest in property now at least many times over instead hold for over 20 years yet lost so much
2017-04-29 21:48
Show i3 your records before you spit more sh*t.
We here only believe what we see,not some make believe sh*t.
2017-04-29 21:48
Now i see why u curse on almost all stocks...just like cpteh's cut loss mkt crash etc ever since he got burnt badly in oil n gas stocks in 2014/2015....
2017-04-29 21:51
real world means tipu people to get rich? no other ways to get rich? I no spoon fed and no call people to chase high price.all the crooked people only will call people buy higher than their buying price.
2017-04-29 21:53
Cpteh can win some coffee,stockman win some money,this apollo win nothing but got diu for being a retard.
2017-04-29 21:55
don't come here and be a saleman, be here when what u buying down at least 20% then recommend people here to support u
2017-04-29 21:55
at least I am here and speak the truth not like many here only promote their stock only wanna for then own gain and no care others die or not
2017-04-29 21:57
The truth is you are a retard.
99.9% of i3 members have higher IQ than you.Save your breadth.
Mummy is calling you for your milk.
2017-04-29 21:59
why scare people to expose your bad deeds, go to donate and pray more to cleanse the bad deeds ar?
2017-04-29 22:02
msia don't need people like u and Johnson lee, cheat people yet told people he no need their donation to cover jjptr losese. heard him say this,if I am there I spit his face
2017-04-29 22:07
Why your friend so poor 1? If own 20 stocks worth RM 50K how much commission for RM 2500 per ctr? His remiser is the 1 laughing.
Posted by Apollo Ang > Apr 29, 2017 09:48 PM | Report Abuse
just now I went to a club, a fren showing to me his CDS a/c consisting of over 20 stocks, he told me in 1990s he invested almost 200k now only about 50k. the portfolio consists some I remember igb,mfcb,keck seng,amprop,fap,skw,insas,menang,guh,ta,iwcity,pesona,datuk keramat,mphb,perstima...etc. he told me that if he invest in property now at least many times over instead hold for over 20 years yet lost so much
2017-04-29 22:44
confuse might be Apollo Ang refer to himself. People won't simply reveal their wealth to others.
2017-04-29 22:49
he is damn rich 5 properties worth millions, he don't even wanna see stocks. stocks to him last time he bought just follow frend for fun, that's why I was telling people here don't simply follow.follow people chasing stocks in the end lose. he said to me thankfully he just invest 200k in the 1990's if he invested more lost more
2017-04-29 22:51
i3 members here said they make a lot of money in 2017 what's the problem buying stocks?
2017-04-29 22:55
ang...How did you lose money in this bull market?
You must be a genius ....in losing money.
2017-04-29 22:58
he reveal cos 50k to him is nothing. only crooked people dare not reveal their wealth not true frens. he even let me see his CDS printed by kenanga, btw I never buy more than 5 stocks each time and never hold this long. over 20 years I better use this money for better use than holding such stocks
2017-04-29 23:01
who say I lost, it's the pityness I saw people losing. I only lose only 4d over 1 mil cos for fun lah over the years.....haha
2017-04-29 23:03
what I make I only donate to 4d, women, cars,restaurants and many more.....haha.not like kyy dunno how to spend
2017-04-29 23:44
kyy is queen control make so much also dunno how to use,not like dato bernard koay 1 night can spend 100k on women only....haha.
2017-04-29 23:58
last time bursa not so many crooks now already control like communist country, only cronies allow to gain cannot play already, no need ur backside use brain, backside for pangsai dumbo....haha
2017-04-30 09:45
In money making , there is crook everywhere , not only bursa , sti also have , even property also got .. just stop dancing the when the songs is over ...
2017-04-30 12:11
For PetronM, if the mother gains 20%, the son gains almost 60% and it will lose at the same magnitude when the mother loses by the same 20%.
Now if we have the odds of mother gaining 20% is say 60%. The investment score for CB becomes 11%.
If you have another option of investment in a Company Stock X, where the return magnitude is 20% within the same time frame, the odds of the return has to be above 80% to justify yourself to invest on this company X instead of Petron's CB.
Ricky it would be nice if you can come with an article how to decide on a high risk high return investment versus low risk low return investment..what is the justification we need to use...
2017-04-30 16:32
story to advise people not to put their hands into the cage full of tigers, don't donate to the rich to become richer
2017-05-01 15:10
not that people never learn cos the crooks learn new tactics to cheat people, after the people learn they being cheated the crooks change new tactics to cheat
2017-05-01 15:41
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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forget it
a fool is born everyday
2017-04-29 19:04