Ini semua pasal Uncle Looi.... nampak laki separuh bogel aje terus excited sangat!

Uncle Looi, its ok this is the 21st century... I'll try not to be judgemental.

This post has been edited by xuzen: Jun 30 2015, 05:02 PM

I wonder if you ask the CIS about Algozen™, what will the say?

somebody has been paying attention!

Why you so sibok pasal SSE? Macam ada chance beli A-share je? You ada paspok PRC kah?

Xuzen

This post has been edited by xuzen: Jul 2 2015, 02:33 PM

Tonight I want to introduce an advance lesson in financial theory: Probability of Return.

1) So far we have been talking about return per se and we have seen how volatility affects our mood and mental well-being.

2) I wish now to talk about this concept called probability of return which is based on statistic z-score methodology.

3) Suppose hypothetical you have a portfolio of various assets or UT and you calculated it to have a return of 3 year annual 14% p.a with a standard deviation 10%. Just take it that a very stable money market fund gives 4% p.a. rate of return. The Sharpe ratio is then a nice hypothetical (14 - 4)/10 = 1

4) Suppose that the return are spaced in a normal distribution curve (aka bell shaped curve).

5) Suppose you are happy with just 10% and wondered what is the probability or chance of getting a 10% hit.

6) Using the formula Z-score = (ROI - Avr ROI)/Std-Dev = (10 - 14) / 10 = -0.4. Now with a Z-score of -0.4, look up a standard text book Z-table you will get 0.3446.

7) This 0.3446 tells you that the chance or probability of your portfolio achieving a 10% or more is 1 - 0.3446 = 0.6554 i.e., 65.54% within a one year period.

8) 34.46% chance you will get a return of 10% or less. So, is this a good hedge? Anything more than 50% is the good already!

9) Suppose you now want only a 5% ROI; then the Z-score becomes 0.1841; which means now you have a 1 - 0.1841 = 0.8159 or 81.59% chance in one year to get a 5% ROI.

10) Conversely, should you desire a say 20% ROI based on your portfolio.... using the same formula; Z-score becomes 0.7257; i.e. 1 - 0.7257 = 0.2743 or only 27.43% chance of getting a 20% ROI within a one year period.

So, what is the key take away message here?

a) Keep your standard-deviation low (aka risk or volatility).
b) Seek the best Sharpe ratio portfolio. How? Use awesome algorithm tool such as Algozen™ to seek the best Sharpe ratio portfolio.
c) Have a realistic expectation.
d) Be a totally Geeky person!

Xuzen

p/s This lessons is not very important to lay-investors but I am writing it here anyhow because I am a Geek! and I am tired of talking the same stuff all the time.

This post has been edited by xuzen: Jul 2 2015, 11:10 PM

Why curse when you an just fire the Fund Manager aka Sell that bloody fund!

Xuzen

My crystal balls also don't have balls for it... (pun intended)!

Xuzen

Mortal is a such a loser ain't it... we cannot see the future; we can only see the past and present. Suxs to be such a loser right?

Not forming conclusions... merely as a guide to the best course of action. Some wise dude called it planning. I know I know... those dudes are losers too for planning so much when the probability has only a unicorn effect.

Sta-Dev and whatchamacallit ratios are running numbers. It will reflect, although there is a lag-time to see it. There is also a real phenomenon called regression to the mean. If there is no major black swan event; the chances are quite high the performance will regress to the mean.

Xuzen