Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Pay Attention To The Russell Stocks Index and Financial Sectors - 20th Jan 19
Hyperinflation - Zimbabwe's Monetary Death Spiral - 20th Jan 19
Stock Market Counter-trend Extends - 20th Jan 19
The News About Fake News Is Fake - 20th Jan 19
Stock Market Bull Trap? January 22 Top Likely - 19th Jan 19
After the Crash, the Stock Market Made a V-shaped Recovery. What’s Next - 19th Jan 19
David Morgan: Expect Stagflation and Silver Outperformance in 2019 - 19th Jan 19
Why Brampton Manor Academy State School 41 Oxbridge Offers is Nothing to Celebrate! - 19th Jan 19
REMAIN Parliament Prepares to Subvert BrExit with Peoples Vote FIXED 2nd EU Referendum - 19th Jan 19
Gold Surges on Stock Selloff - 18th Jan 19
Crude Oil Price Will Find Strong Resistance Between $52~55 - 18th Jan 19
Stock Market’s Medium Term is No Longer Bullish. It is Now Mixed - 18th Jan 19
SPX and Gold; Pivotal Points at Hand - 18th Jan 19
Fable Media Launches New GoWin Online Casino Affiliate Site in UK - 18th Jan 19
The End of Apple! - 18th Jan 19
Debt, Division, Dysfunction, and the March to National Bankruptcy - 18th Jan 19
Creating the Best Office Space - 18th Jan 19
S&P 500 at Resistance Level, Downward Correction Ahead? - 17th Jan 19
Mauldin: My 2019 Economic Outlook - 17th Jan 19
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19

Market Oracle FREE Newsletter

UK House Prices, Immigration, and Population Growth Trend Forecast

What Every Investor Can Learn from Gamblers

Personal_Finance / Learning to Invest Nov 06, 2018 - 12:23 PM GMT

By: Steve_Marks

Personal_Finance

The past week may have been rather unpleasant for the continually sinking stock markets, but there was someone who still managed to make an awful lot of money: the as-yet-unidentified holder of a Mega Millions lottery ticket worth $1.54 billion (£1.2 billion), or around $878 million (£685 million) after tax.

The interesting point here is not that somebody won, but that there was such a scramble to buy tickets beforehand. Like that infamous episode of Friends, this highlighted an important point about human nature: people fail to have any real understanding of probability.  


So what, exactly, can you as an investor take away from this? 

The strange phenomenon of the eternal optimist

According to the statistics, Americans spent a staggering $80.5 billion (£62 million) on lottery tickets in 2016 alone. This phenomenal amount can largely be explained by society's eternal optimism, a quirk that companies and governments have been exploiting for centuries.  

It turns out that we have very little interest in actual probabilities – what we really care about is the tantalising thought of how much we could win. Whereas one might show only a mild curiosity were their odds of success to rise from one in one million to one in 100,000, their pulse would quicken if informed that the jackpot itself had gone from £100,000 to one million.

The reason behind this is simple: whereas probabilities are impersonal and abstract, the thought of money – and more importantly what we could do with it – is something far easier to picture than mere numbers on paper.  

The role of emotion 



What we can garner from this is that emotion has a huge part to play in our monetary choices. This is a sentiment backed up by a study psychologist Ellen Langer conducted in the 1970s. Offering to buy people’s lottery tickets prior to the draw, she found holders demanded four times as much in instances where they’d chosen the numbers themselves, as opposed to having them randomly assigned.

This was attributed to the element of control associated with the act of actively picking them out, a behaviour which has also been used to explain the increased likelihood of investors repurchasing stocks that they have previously sold for a gain.

The same sort of behaviour has been anecdotally observed in regular gamblers, too. Let's take sports betting as an example. As noted by experts redbet, sports betting offers fixed odds, with hundreds of sporting types and events to choose from. Despite this, those who play at online sites are likely to repeatedly bet on a horse or sports team that has delivered victory in the past, often irrespective of the odds themselves.

So what lessons can be learned? Firstly, that humans are predictable creatures: if something looks good and evokes an emotional response, the optimist in us is likely to gravitate towards it; secondly, that we frequently repeat previous patterns of behaviour.   

Embrace these teachings, use them to calculate what others will do, and then do the polar opposite, and the chances are you’ll be the one who comes out on top. 

By Steve Marks

This is a Paid Advertorial.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules