Posted by Brian from Shawnee on August 31, 2004
In Reply to: A gamble posted by Lewis on August 31, 2004
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: : : "You invest simply because you hope that you will get back to even. It's not unlike going to Las Vegas."
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: : : What does "get back to even" mean here?
: : This is a weird concept to me, but it implies to 'break even'. ie. You don't win, you don't lose, you end up financially in the same place you were in when you started. Although I'd like to hear this quote in context, because for the life of me, I can't imagine why any would invest simply to break even.
: If you have ever seriously or addictively gambled, you will be familiar with the problem of a losing streak - during it an addictive gambler will not quit and will continue betting an increasing sum with the intention of getting a win that wipes out all other losses (or going broke). during that period of (often misplaced) optimism the gambler gives up on actually expecting to make a profit but yet still intends to 'break even' - to break away from the gamble when the gains 'even' with the earlier losses.
: It is not very clever, especially of you break the rule that says that you should never gamble more than you can afford to lose.
This gambling to break even is also seen among unsophisticated stock market investors. You buy shares at a dollar a share, and when the price goes down to ten cents a share, you buy more, thinking "now it only has to go up to 45 cents to break even". Of course a stock like that rarely recovers and even those that do usually take years to do so.