Quote from: UnicornFarts on October 28, 2014, 11:04:32 PM

Quote from: smooth on October 28, 2014, 10:57:17 PM

Quote from: UnicornFarts on October 28, 2014, 10:54:31 PM

Quote

Bigger risk, better reward Grin

not always the case. buying magic beans is really high risk.

ive never heard of magic beans actually paying off.

so not always the potential for higher reward just cuz something is higher risk. Roll Eyes

If there is no potential for gain (or even recovery of your investment) then there is no risk, just guaranteed loss.

Risk means you don't know what is going to happen.

ok smartass o.O

my point was that higher risk does not always equal higher reward. if somebody said "buy these magic beans and go rob the giant the beans cost $100" then my risk is $100.

if some other dude said "buy my magic beans they are the real ones they cost $10,000. but you get what you pay for. no risk, no reward"

Then my risk is higher ($10,000 vs $100) but my payoff is the same (gold the giant owns) and my chances of getting magic beans are the same (pretty freakin' slim).

That's gotta be the worst analogy in the history of analogies. Cheesy

Risk and reward simply pertains to the amount of winnings or losses based on a binary model: Here is the amount you lose if you lose, and here is the amount you win if you win. It doesn't however saying anything of the probability of you winning or losing, which alters the perception / dimension of risk and reward completely.

An impossible task might have a healthy $1000 reward for winning, and a meaningless $2 fee for losing, but it would still be a horrible investment / gamble.