Comments on: Investing, Taking Risks, and A Game Of Darts

By: Make Friends, Earn Money

Make Friends, Earn Money — Mon, 02 Jun 2008 18:56:57 +0000

I think that we can learn some important pointers from investment speakers, but the reality is that we also have to make the right decision for our own personal situation and sometimes that means compromise.

By: Pinyo

Pinyo — Mon, 02 Jun 2008 11:49:07 +0000

@FFB – That’s a good strategy. I think the idea of building a solid foundation before concentrating on focused strategy is good. Even if your idea fail — which it most likely will most of the time — you have something to fall back on until you struck gold.

@Jerry — But that was exactly my point. People who advocate going all out with focused strategy are basically saying that you can hit the bullseye every time…and that is flawed.

@Subba — You may have missed it. The rule is slightly different and the person who aims for the bullseye do not get point for hitting other part of the board, and the second person do not get point for hitting the bullseye. It’s done to illustrate a point.

“So I think index investing till you are somewhat skilled and slowly shifting into the focused category is the way to go, in practice.” <– that’s a great strategy, and yes, it’s important to start early.

By: Subba

Subba — Sun, 01 Jun 2008 20:26:10 +0000

Hmmm….If you aimed for the bulls eye every time, you would likely at least hit the board so you get the best of both? Does that make this a flawed analogy (or did I miss something)? I get your point though.

Personally, I think it is important to start investing early rather than wait till you have lot of knowledge. So I think index investing till you are somewhat skilled and slowly shifting into the focused category is the way to go, in practice.

By: Randall at CreditWithdrawal

Randall at CreditWithdrawal — Sat, 31 May 2008 13:22:09 +0000

Different people have different risk tolerances and payout expectations. It’s like the lottery. Sure the odds are about 140 million to one, but that ONE,..

Anyway, great article.

By: Saturday Roundup - May 31st, 2008 - Motivated Weekend edition - Credit Withdrawal - Helping You Kick the Credit Habit

Sat, 31 May 2008 13:06:06 +0000

[...] – Investing, Taking Risks, and A Game Of Darts I agree that it depends on the person. Taking a risk for one BIG payoff is more [...]

By: Mike

Mike — Fri, 30 May 2008 22:16:15 +0000

Thanks so much for the mention. If I could hit the bullseye every time, I’d choose option number one – but I’m too lazy for that and would rather focus my energy on other things.

By: Jerry

Jerry — Fri, 30 May 2008 20:29:34 +0000

Who can hit the bullseye every time? Nobody I ever played darts with, anyway. This leads me to the conclusion that either this investment idea makes precious little sense, or the analogy is flawed (most likely the latter). I think that international diversification makes the most sense in a lot of ways, especially now that the dollar is absorbing a hit overseas. It gives you a little bit of insurance that you can have SOME element of your portfolio that is doing well, even when others are taking it on the chin or treading water.
Jerry

By: FFB

FFB — Fri, 30 May 2008 15:32:25 +0000

When I play darts I tend to fill up my numbers before I go for the bullseye as that’s the toughest to hit (cricket if I recall correctly). An analogy here could be diversify with less risk until you have enough experience to try more focused investing. Then maybe you can go for some riskier stuff.

Some days I just can’t hit the bullseye (might have something to do with being at the bar). On those days I keep filling up the easy points. If you know you can’t do focused investing then go for the easier diversification. You can still get ahead in the long run.

By: Pinyo

Pinyo — Fri, 30 May 2008 14:46:19 +0000

Thank you Emily and Sara.

@Curt — Ah, but that’s why we diversify internationally. I would put all my money in the U.S. either.

By: Curt

Curt — Fri, 30 May 2008 14:39:47 +0000

Great post. Thanks for referencing my article. I like your analogy to the game of darts. But, of course I have to disagree at least a little bit.

Based on the direction of the dollar and the stock market over the last decade (as explained in my article), diversifyed investing in domestic mutual funds is MORE risky then finding a few winners or investing in your own business that has historically beaten the market.