panda

There is a disclaimer here to make before I start. I am NOT encouraging gambling by this post. The rules of gambling is quoted here just as an example to illustrate my point.

In the book that I have been reading recently, the author made the remark – Winners plan to lose as part of the winning game, while losers only plan to win and have no room for failures in any game. Let us consider the game of gambling. Suppose the chances of winning a gamble are 1:10 (out of 10 times, the gambler only win once). Yet, the rewards for winning in the gamble are 1:100 (you bet $1 and the $1 has the potential to win you $100). The winners will plan to have enough money to lose at least 9 times before winning the 10^th one. The gamble is worth it for the winners as the risk to reward ratio is 1:10. A quick calculation will reveal that if the winners have $10 to start, losing $9 is part of the plan before winning the final $100. However, the loser will bet whatever they have and if they lose once, they call it off. In short, the losers will bet all the $10 that he has, and call it off if they lose it all (more conservative losers will bet amounts less than $10, and if they lose, they call it off). Yet, there is another class of people who are intimidated by the low chances of winning, commonly known as 十赌九输 in Mandarin and are not even willing to try.

Are there risks involved in the winners’ plan? Definitely. As most people with a good grasp of statistics will know, the winner may or may not win at the 10^th try even though the odds reveal that if he tries hard enough, he will definitely win one day. In other words, if the winners do not win at the 10^th try, he will bankrupt. This is the risk. Sitting on the fence not betting sounds to be a good idea to most people.

My point? Nope, I am definitely not gambling. I am investing. What is the difference? Gambling takes uncalculated risks, while investing takes calculated risks.

Once again, I am NOT encouraging gambling. For those of you who are thinking of betting in the World Cup, allow me to say that as much as I know about the winners’ mentality, Singapore Pools know better. Do not venture into unfamiliar grounds, that’s uncalculated risks. That’s gambling, definitely not investing.

# posted by dreamy_panda @ 9:59 AM