So basically we don’t have the risk tolerance to do that kind of bet, but if it’s a smaller share of our total assets or we can have a stop-loss, then yeah, totally.
***** people, the question is all of your savings, in or out. Not would you put 10% in.
Answer still yes, all day.
I am not big on “all or nothing” mentality in pretty much all aspects of my life.
But, yeah the answer to the original question would be no then.
^finally a comrade that understands
god bless
So basically we don’t have the risk tolerance to do that kind of bet, but if it’s a smaller share of our total assets or we can have a stop-loss, then yeah, totally.
Yep
+1
The difference between 80 and 90% is vast.
you either have to be an idiot (i.e. unable to perform basic npv analysis) or over 50 to not do this trade. if you have any human capital remaining, it is pretty dumb to not take an 80-90% chance to triple your money in a couple of years.
i also agree that this opportunity would never present itself in this way because it is too much of an obvious choice.
anybody who is saying no to this deal on AF right now clearly doesn’t understand the risk of equities in their portfolio right now. right now, if you’re in the broad equity market, you’re basically accepting a 5% chance of a 50%+ loss and a 20% chance of a 20%+ loss in the next couple of years but with only a ~30% chance of returns greater than 40%, and a 50% chance of -20% to 30% returns in a couple of years. the risk return is so much better with the proposed scenario than any market available now. please excuse my broad approximations but you get the gist.
considering your don’t have to bankrupt yourself for the 80% chance of a 200% return, there is no reason not to unless you absolutely need the money within the next decade or so.
The broke people would take that deal all day, and the people with money to lose would not. Diminishing marginal utility of wealth?
Matt, your difficult life in the frozen wasteland of the North has clearly made you delirious. Let’s say you are worth $1 billion. Why would you risk all your money to be worth $2 billion? Plus, if you repeat this experiment 1000 times, you will end up with zero money for sure. If you have been financially successful for the past X years of your life, there is no reason to believe you can repeat that success in the next X years. Do you think the guy who made Groupon was not lucky at all? The economy might go into recession, you might be just unlucky, or any number of circumstances can change. The choice is completely different if you can choose fractions of your portfolio to invest in this strategy (but that is not the case, based on this scenario).
I agree with the last two posts. It really depends on how close you are to your savings objectives. If I had $10 million, I would not bet it all on doubling it to $20 million. But if I had $100,000, I would bet that.
100K is a lot of money to risk imo… I guess that makes me rich…
he distinctly said “all of your savings”. if you make a billion and then buy an island or a private company, technically, that shouldn’t be included as “savings” as this is real property or inaccessible funds. savings usually means money you have kicking around that you are considering investing in public equities or CDs. i mean he even went so far as to say an emergency fund was excluded so there’s lots of flexibility with what you have to put on the line here. semantics, but still. the way i see it, you bet it all on this 200%, 80% chance opportunity, and then you liquidate your emergency fund and try again, then you liquidate your car and try again, then you liquidate your house, try again, and so on.
Ok. I read savings as “assets”, on the assumption that if it does’t work out, you’ll be living on the streets, or at least a substantially poorer lifestyle. if I could keep lots and lots of my assets, then I might do that trade. Of course, doubling or tripling savings might not be that impressive of savings is only a portion of assets.
Yea I was thinking just savings. Not having to liquidate your car, house, etc. And not leveraging your credit cards for a loan or anything
Then yes, if it really is 80-90%. Though, how can you really know that? Seems optimistic.
So you really mean, would you do the trade if it used up all your liquidity for other trades but otherwise didn’t affect your lifestyle?
In that case, yeah, I’d do it. What’s liquidity for, anyway??? (This assumes that I could liquidate some other asset in an emergency, albeit at a loss).
Thanks for clarifying. The question is obviously different if you risk $1 million, but you have a $2 million house in reserve. An “emergency fund” to me, is enough money to satisfy short term liquidity. Wording the question as “all” savings was sort of misleading if this is only meant to represent a fraction of your assets.
Personally, I have less than $20k of physical assets and posessions. The overwhelming majority of my net worth is invested in various liquid investments.
^ …Willing to walk out in 30 seconds flat if you feel the heat around the corner.