All of the scenarios have an expected value (return) of 3% and all have a volatility of 4%.

They are all Bernoulli trials in that there are only 2 possible outcomes. They differ both in the probabilities and the returns (or losses) for each possible outcome.

__Scenario A__:

50% Chance of 7.00% Return

50% Chance of -1.00% Return (1% Loss)

__Scenario B:__

10% Chance of 15.00% Return

90% Chance of 1.67% Return

__Scenario C__:

90% Chance of 4.33% Return

10% Chance of -9.00% Return (9% Loss)

If you have a distinct preference select the one option that fits your preference. If you are indifferent to two alternatives you can select both.

Example: Suppose you like option A the best but are indifferent between B and C. You could select

*both*: A > B > C

*and*A > C > B.

Feel free to offer comments on why you have the preferences you do.

B is the only scenario where no loss is possible--a great outcome, but not very realistic since numerous factors can drive a stock down.(Buying a solid value stock at a depressed price for a margin of safety is probably the closest to scenario B). A is like a high yield foreign dividend stock with irregular payouts. C is like a moderate growth stock. My portifolio has a mix of value and growth.

ReplyDelete@Lemoneater,

ReplyDeleteInteresting comparisons.

Thank you for the fun poll. Have a great weekend!

ReplyDelete