Objective probabilities
Objective
probabilities are based on mathematical analysis, experiments, and mathematical
equations than anecdotes, personal experience, or hunting. In the financial
world, taking advantage of opportunities can be very important to prevent from
making emotional decisions when investing.
We
often deceive ourselves into thinking that "we have always been lucky in
car investments" or that "we have not lost money on gold".
Subjective
Probabilities
The
probabilities where we use our ideas, emotions and thoughts on the basis of
past experience to find opportunities and probabilities. Example: we think,we
have an 80% chance that our best friend will call today, because her car broke
down yesterday and he will need a ride.
Example
let's
say Ali buys a raffle ticket to support the local Girl Scouts home team. The
team sells 1,000 tickets. From a standpoint, Ali has 1 in 1,000 chance of
winning. But humbly, John thinks his chances of winning are very high because
he "feels good about it." However, his chances are still 1 in 1,000.
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