Hulk, The bottom line of investing is called ma
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(Total Views: 646)
Posted On: 05/22/2020 4:50:43 PM
Hulk,
The bottom line of investing is called mathematical expectancy (ME).
ME=PW*$W-PL*$L
That is probability of winning times amount one wins - probability of losing times amount one loses.
If ME is positive your investment is good, negative otherwise.
For example, say COVID trial does not pan out, stock will go down to say $1.2 and if it pans out stock goes to $8. Let's assume there is a 50/50 of this happening.
We have then: 0.5*($8-$3.1)-0.5*($3.1-$1.2)=$1.5 meaning it is a good investment.
These are made-up numbers, of course (more or less). I think the probabilities are different. But just put your numbers and decide if it is a good investment.
Of course, don't invest anything you cannot lose.
And then, of course there is the other indications. If you are a long term investors have to do the same with the others adding and subtracting. If you are a short time investor factor-in only the catalyzers during the life of your investment. Once you have more prize discovery (as time goes by) re-adjust your calculations.
Good luck !!!
The bottom line of investing is called mathematical expectancy (ME).
ME=PW*$W-PL*$L
That is probability of winning times amount one wins - probability of losing times amount one loses.
If ME is positive your investment is good, negative otherwise.
For example, say COVID trial does not pan out, stock will go down to say $1.2 and if it pans out stock goes to $8. Let's assume there is a 50/50 of this happening.
We have then: 0.5*($8-$3.1)-0.5*($3.1-$1.2)=$1.5 meaning it is a good investment.
These are made-up numbers, of course (more or less). I think the probabilities are different. But just put your numbers and decide if it is a good investment.
Of course, don't invest anything you cannot lose.
And then, of course there is the other indications. If you are a long term investors have to do the same with the others adding and subtracting. If you are a short time investor factor-in only the catalyzers during the life of your investment. Once you have more prize discovery (as time goes by) re-adjust your calculations.
Good luck !!!
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