I was already going to ask you something.
I find that my mind closes up when I try to figure probabilities.
Suppose the following.
There are three stocks, each of which has a 1/3 probability of becoming worthless, and a 2/3 probability of tripling.
If you just own one, obviously (and your estimates of the probabilities are correct), you know what chances are for either outcome.
If you divide your money equally among all three, you would have a 1/27 chance of losing all your money, which is fairly low.
How do you calculate the probability of tripling your money on all three? Is it 8/27, or not quite 1/3? Does this mean that in this situation you are 8 times more likely to triple your money than to lose it all?
Whereas if you only buy one stock, you are only twice as likely to triple your money as to lose it all.
I realize that there are all sorts of intermediate outcomes with different probabilities. But I don't have a clue how to calculate those. For example, I would like to know the probability of just breaking even.
So, just in case probability calculation is right up your alley, or up someone else's, I thought I would ask. I fear I am too old to agitate my remaining neurons by studying this seriously. |
