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More than 50% of us think they are better than all of us: “I will balance my work-life; I will stay in shape; My career will be a success; I will not get into a car accident; My marriage will last; I can quit smoking any time; I really don’t need insurance. I am sure of it. I know this for a fact…” Huh, come again. Yes, I said it… it may be true, in your own perception, but in reality you will most likely be wrong. The numbers don’t lie. We are over-confident when it comes to our own abilities and certainly when it comes to “calculating risks”.
Have you played roulette lately? Did you play the American or European version? In American roulette the house has 0 and 00 versus only 0 in European roulette, which impacts the odds to win. Do you know what the odds are of winning a single number? Do you even care? I don’t think so because you are likely in a casino for other reasons than the professionals, right?
This is who we are: We like a sure gain over a gamble; this is why we have our cash in a savings account or government bonds. We like a gamble over a sure loss; this is why we dislike buying insurance for events we cannot predict, but know will happen. We have a high tolerance for risk if the potential payout is huge; this is why we buy lotto tickets. We think past events have an influence on future random events; this is why we think Central Banks in Europe and the US have everything under control.
Have you heard of the “MAOA” gene also known as the “Warrior” gene? Financial regulators make anyone who wants to invest, fill in a risk profile so financial advice can be tailored to your risk appetite. They fail to ask about the Warrior gene. They should, because if you posses this gene you will be much more tolerant to risk than the rest of us. I suspect that people in possession of this gene are more likely invested in the stock market than in a savings account. In order to take on a bit more risk, you can change your DNA or eat a lot of turmeric, a natural alternative. However, don’t panic, there is a practical solution for the rest of us.
You probably call it “cost of protection”. It’s all those products you buy to protect yourself against a loss. You do it for your car, your life, your house, your belongings, your health, your travel and many more. When we buy insurance, we hardly know the odds of the events we insure… or do we? We want to invest, but don’t like the idea of loosing a significant part of our cash. So, doesn’t it make sense to protect ourselves against significant losses and invest at the same time?
At i-Cthru we protect your portfolio and view it as an asset. We set up automatic sell orders and buy protection wherever we can, because the odds of a negative event are stacked against you. To learn more, check out our investment process. Come under our umbrella because when it starts raining… we are all the same.