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Re: Retiring Rich (was Re: Ideocosmology)



At 19:56 3/30/98 EST, David Dockstader wrote:
... Probably the only real model anyone needs
is exponential growth...start at age 30 and put $1000 in the
stock market every year and with an average historical yield retire at 65
a millionaire.

If you invest in companies that have historically done better
than average your return will probably be better than average and you can
retire a multimillionaire.

... On the other
hand you can win at the race track. Again the model can simply be developed
from historical data. ... Just bet on horses and riders who
consistantly win


It is a given of investors (apparently) that risk and reward tend to vary
together.
Here we seem to see three choices spanning that spectrum - though why
companies with an above average yield should be more than usually risky
is not clear to me.
Clearly, the most adventurous option is wagering on four legged animals.
It certainly isn't evident to me at least that the jockeys or horses with
the winningest track records continue to do so - though that sounds quite
plausible.
One wonders how large a bankroll one needs to ride out the statistical
variability in withstanding the losses from backing one of four competitors
in each race even though one knows a particular competitor may have 1.5
times the chance of the other three individuals of winning.
So for example one could model the chances as
a - 3/9 = 0.33
b - 2/9 = 0.22
c - 2/9 = 0.22
d - 2/9 = 0.22

I assume that one would need to develop a list of above-average performing
horses or jockeys.
And then (I speak as a complete ingenu in this field) one would evaluate
the product of estimates of performance and the offered 'reward' on these
events, i.e. "the odds"??
In a perfectly ordered pari-mutuel system, I assume these products would be
more or less constant. But here again, I expect I show my ignorance:
the betting odds are not objectively based on prior performance (if I
understand this system) - but rather on betters 'votes' (with their
wallets...)
And so David leads one to expect that the bulk of betting is not done on a
basis of maximizing the expected gain, but rather on maximizing the maximal
gain which I suppose means betting on outsiders....

A most interesting and unexpected thread.

Whatcott Altus OK