The votes are in - Obama wins.
To keep eyes on the screen, the mainstream media would have
you believe the election was much closer than the actual
What people don't realize is that the election was over long
ago. Just look at the probabilities. For months professional
statisticians have stated Obama's inevitable win. Yet for some
reason people want to ignore the stats.
Believe me, I understand the rationale. When the odds are
stacked against you, you feel obligated to grasp on to that small
glimmer of hope. In Romney's case, it was 10-20%.
And if you're a regular investor, the bad news is that your
odds of success aren't much better …
That's because in an efficient, random market you can't
predict with consistent accuracy the fate of an investment. Yes,
I know, I know, you might have a guru that says he can beat the
market and hey, maybe he can over the short to intermediate
But over the long term, only a few lucky ones can achieve such
greatness. The probability just isn't there. Remember, picking
stocks is equivalent to a coin toss. You have only a 50/50 chance
of success. And to have three successful investments in
succession, well, the statistics say the chances of that
occurring are the following:
As you can see the probability isn't very good …12.5%. But I
Diversification doesn't change your probability of success
either. In fact, I would argue that traditional diversification
doesn't factor in the relative risk between assets like bonds and
That's why you want to diversify across various time frames,
strategies and markets. Diversifying trades over various time
frames using risk-defined strategies like my low-risk options
strategy allows you to make money WITH probabilities.
Moreover, if you use this options strategy, you have the
ability to diversify or define risk across more products because
less capital is required to make the same return.
And more importantly, monitoring and managing your portfolio
through risk-weighting (which I will discuss more in the near
future) will assist you in a more accurate assessment of your
overall portfolio risk.
If you are interested in how I use probabilities for my own
investing please take the time to watch my webinar, "
How I Collect Monthly Income Using the S&P
And as always, if you have any questions please feel free to
Editor and Chief Options Strategist
The Strike Price