How to figure out how confident is someone of their stock suggestion?
As a follow up of the post https://neyinvesting.blogspot.com/2015/04/how-much-of-stock-should-i-buy.html How to figure out how confident is someone of their stock suggestion? Maybe you are interviewing someone, following a news letter with stock tips, or just watching investment that the gurus made on tv. Here is a good rule of thumb that works for me. I created a matrix to figure out as a rule of thumb the confidence of someone in their investment, bet, idea... according to the size of a position: Quick explanation of the picture bellow: 1) Never mind the formulas of the left that's explained in detail on the other post. 2) this matrix has a risk reward ratio, for example if you think you can double you initial bet, then you have a 2 risk on reward ratio. 100% risk divided by the 200% reward. a 10 risk reward means you expect the investment to go up 10 times. 3) the other axis is winning probability. if some one tell you they think the investment will go up 3 times (3...