Comments on: Common sense and investing don’t always mix.

By: SJ

SJ — Tue, 02 Jun 2009 04:03:21 +0000

The normally constrained Monty Hall problem is pretty easy… Basically with the constraints that you KNOW the guy is going to show a goat then it transforms into… if I pick a goat first then switching gives me a car.

I like the weird versions that are almost exactly the same but w/ small amounts of cheating. I think the case in which the guy randomly shows you a door and somehow ends up w/ a goat is fun to look at… and even tho it sounds to be the same, it’s different!

By: Mike

Mike — Tue, 02 Jun 2009 01:56:22 +0000

Yeah, I had to read the explanation several times when I first encountered it. Once you understand what it’s saying though, it seems so obvious. Love that kind of thing.

By: Four Pillars

Four Pillars — Tue, 02 Jun 2009 01:36:01 +0000

I’ve never heard of the “Monty Hall” problem – I had a hard time understanding it but then I figured out that they are right (after 20 minutes!)

By: Mike

Mike — Mon, 01 Jun 2009 21:15:29 +0000

Mark: When did I say to ignore risk?

If anything, I’d say I bring up the topic of risk more often than most investment writers.

(I just checked: According to Google Webmaster Tools, “risk” is in fact the 3rd most-used word on this site–excluding prepositions, articles, etc.)

By: Blake

Blake — Mon, 01 Jun 2009 17:08:03 +0000

“A growing company should be a growing stock. (Wrong.)”

I wonder how many are fooled by this poor rationale. I’ve heard this one numerous times in the past from friends who are, er, maybe a bit naive when it comes to investing; ‘Company X should go up because summer is coming and that’s when they do their best business’. D’oh!

By: Rob Bennett

Rob Bennett — Mon, 01 Jun 2009 16:12:56 +0000

I think that the point being made in this blog entry is a very important one.

I don’t think that investing is all that hard to understand. But it is in several respects extremely counter-intuitive. That throws people.

So, no, you cannot just go by common sense. I believe that the best investing minds are minds that can handle paradox.

Rob

By: Dave C.

Dave C. — Mon, 01 Jun 2009 15:49:00 +0000

I was watching the “Un-Broke” TV program the other night which I thought was rather helpful and timely program on Personal Finance for the general public. One of their statements was that “the stock market was an indication of the health of a company or the economy”. I didn’t like the way they worded that, and I felt that it could have been said better: “The stock market and share prices are an indication of how people generally think a company is doing, or that everybody is panicking or going nuts.”

Throw in misleading accounting, analysts with an agenda, and irrational investors and you get … what? Not always an accurate picture of how a company is doing, maybe?

By: Mark Wolfinger

Mark Wolfinger — Mon, 01 Jun 2009 14:55:59 +0000

Agree. Lots of ‘obvious’ statements are not true.

Passive investing outperforms managed investing. The evidence tells us that’s true.

Oblivious investing is another matter. I get the point of not worrying and investing for the long term. But my over-riding question remains: Why ignore risk?

Best regards,