I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!


Click to email CW8888 or Email ID : jacobng1@gmail.com



Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down



Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Showing posts with label Education - Trading - Laws. Show all posts
Showing posts with label Education - Trading - Laws. Show all posts

Saturday, 31 August 2019

The Laws of Investing


Read? The Laws of Investing

Law #11: The most persuasive evidence is what you want to be true and/or have experienced personally.

A good investor turns over many rocks in a quest to find something special. But special is subjective. What you think is amazing may bore me, and vice versa. The special things we discover usually aren’t like nuggets of gold, with a specific quantifiable market value. Special is in the eye of the beholder, and because of Law #10, the trick is getting others to eventually behold it. Take value stocks. They are loved by many and, by definition, hated by others. Your story vs. mine.

“Special” is defined by a story, and the undefeated Pulitzer Prize-winning storyteller inside your own head is always yourself. The story that sounds the best is typically:

What you want to be true. The incentives for being right in investing are so big that it’s hard to think clearly about your analysis without getting distracted by the potential rewards. Predict the right weather and you get to wear the right clothes. Predict the right investments and you get to retire on the beach. High stakes cause fuzzy thinking because they push you to desperately want something to be true even if it’s not.

What you’ve personally experienced. Familiarity is a doppelganger of accuracy in your brain. The two can be hard to tell apart. Stuff you’ve experienced personally is way more realistic than what you merely read about, and two equally smart investors with the same data can come to opposite conclusions, swayed only by the differences in their unique life experiences.


Evidence you don’t want to be true and haven’t experienced can be persuasive, of course. But the amount of reinforcement you get when you do, and have, is easy to underestimate.


Read more? Other Laws


Thursday, 29 November 2018

Sturgeon's Law In Our Investing Journey


Read? The Art of the Good Life #50 : Sturgeon's Law

Sturgeon Law states that 90% of everything is crap, or rather “crud” if you prefer.

Hmm .. It seems to be true in Uncle8888's stock picking skills for his investment portfolio after 19 years from Jan 2000 to 29 Nov 2018.  90% of his stock pick are really crap!

Top 3 winners offset all the losers!

3 out of 56 stocks is about 5%. Simply 90% of all other stocks are just crap!

So he might be better off waiting 90% of his time to filter out that 10% at the next Bear market!

Less analyzing. More investing - CW8888




Saturday, 21 March 2015

Our Desired Investing Outcome: The Pareto Principle (80/20)


Read? The Pareto Principle (80/20) Investing Strategy


Uncle8888 wrote this in ..

Sunday, 2 September 2012

Investors. Know at least Pareto's Principle


Pareto Principle ~ “20% of the effort generates 80% of the results.”

Market Timing vs. Time in Market???
Fundamental vs. Technical Analysis?
Short-term Trading vs.  Long-term Investing???

For long-term investors, we should be observing Pareto's Principle.

80% patiently waiting for Market Timing and then spend 80% Time in Market with 20% of our effort will generate 80% of the results.

And then we spend another 80% market timing for next cycle.

Read?  Laws Applicable To Investing

------------------------------------

Quoting the wisdom from this man, Rolf SueyMarch 20, 2015 at 9:48 AM

@Investment

this principle applies, but it is an outcome. It cannot be use as a strategy.

Since every investment before u press the buy button is ur top priority. If u have 5 stocks, u cannot say my priority is only 1 or 2 out of the rest.

I guess that maybe what B is trying to say is now he is only focusing on few stocks only with higher amt vested in each stock. And this is good enough for him getting good rtn.

but if 20/80 strategy applies... then out of ur 10 stocks, only 2 will give u good money. then how sure are u that it will comes from ur top holdings?


--------------------------------------

Uncle8888 fully agreed. It is an outcome and NOT a strategy.

BUT, this should be our desired investment outcome after XX years of investing in the stock market. We should be proving this principle RIGHT!


How?




Uncle88888 is quite sure that we are going to prove this principle WRONG by selling our winners sooner; but holding on our losers for the longest possible time before we are forced to sell.


Our investing strategy will likely to determine our investment performance outcome after X decades in the stock market. When our strategies are NOT rightly executed; they will NOT lead us to our desired outcome - The Pareto Principle ~ “20% of the effort generates 80% of the results.”

 




Sunday, 30 December 2012

Occam's Razor in TA and FA? (2)



Read? Occam's Razor in TA and FA?

What is in FA?

FIXED Numbers!!!

The financial numbers and ratios that are presented at quarterly financial reports or annual report are fixed. You as investors cannot "suka suka" change them.

You analyse these numbers and ratios and decide whether you are still comfortable and happy with the reported numbers. Value investing is the way to do it for FA.


It is You See What You See.


What is in TA?

Too many School of Thoughts with too many adjustable parameters.

Every TA school claims success, BTW, who lose their money in market, then???

With so many adjustable parameters for TA indicators,  it is You See What You LIKE to See by adjusting these parameters to tell your own story and convince yourself that you are right. Each telling their own story. No???

Bluffing yourself or what???


 







 
 

Sunday, 2 September 2012

Investors. Know at least Pareto's Principle



Pareto Principle ~ “20% of the effort generates 80% of the results.”

Market Timing vs. Time in Market???

Fundamental vs. Technical Analysis?

Short-term Trading vs.  Long-term Investing???

For long-term investors, we should be observing Pareto's Principle.


80% patiently waiting for Market Timing and then spend 80% Time in Market with 20% of our effort will generate 80% of the results.

And then we spend another 80% market timing for next cycle.


Read? More articles on Laws

Uncle8888 took more than 12 years to finally understand these Laws!!!


Wednesday, 24 November 2010

Utility of additonal wealth and investment choices

Read? What's wrong with REITs and NCPS?

Before you start borrowing big fat boys' investment strategy, you may want to understand the behaviour theory behind it.

Bernoulli (1738) popularised the concept of the utility of additional wealth is inversely related to the amount already processed. This may help to explain why many wealthier individuals (big fat boys) may be more inclined to choose fixed income investments over day-trading. Their unwillingness to assume greater risks is related to their perception that they have much to lose in the realm of personal possessions and not much to gain in the realm of personal needs.

Thursday, 18 November 2010

Occam's Razor in TA and FA?

Occam's Razor: "one should not increase, beyond what is necessary, the number of entities required to explain anything."

“The explanation requiring the fewest assumptions is most likely to be correct.” or "Simply put, the simpler one is generally correct."
 
Yeah. To apply Occam's Razor in my stock analysis:

  • By simplifying my TA, I just look at support, resistance, price-volume actions, and trend lines.

  • By simplifying my FA, I just look at consistency in dividends and low dividend payout ratio. Dividends are real money paying out by a company, and can only be sustainable if company continues to have cold hard cash from its business. Probably, this is the only indicator in FA that really matters; anything else are just guess works by retail investors who have limited resources to do anything substantial.
Read? Fundamental or Technical Analysis? - Revisit 3

Read? Pareto Principle

Sunday, 14 November 2010

Pareto Principle

By Albert Yang



Read? Parkinson's Law

Pareto Principle ~ “20% of the effort generates 80% of the results.”


Background Blurb: (From Wikipedia)

The Pareto principle (also known as the 80-20 rule, the law of the vital few and the principle of factor scarcity) states that, for many events, 80% of the effects come from 20% of the causes.

Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed that 80% of income in Italy went to 20% of the population. It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients."

The Pareto principle is only tangentially related to Pareto efficiency, which was also introduced by the same economist, Vilfredo Pareto.

Pareto developed both concepts in the context of the distribution of income and wealth among the population.

Known to most of us as the 80-20 rule, it explains quite a bit about how our world is run. 20% of the clients make up 80% of the sales. 20% of the clients make up 80% of the headaches. 20% of the activities take up 80% of the time.

The list is endless. There are even variations on the 80-20 principle, such as the 90-10, the 95-5, and the 1-99. Of course, if you take a Pareto of a Pareto (Pareto2) you get 80-20 of 80-20, yielding you 64-4 (80% of 80% = 64%; 20% of 20% = 4%).

Like Parkinson's Law, Pareto Principle is another big law that engulfs your work life as well as your personal life. Given that your job is to optimize your life, spotting Parkinson's Law, and applying Pareto Principle to it, is really the basis of the optimization.

Let me try to explain how it applies to most projects in the business world, and in combination with Parkinson's Law, you will begin to see how these two laws all but guarantee that a project will be delayed and over budget (even before you factor in Hofstadter’s Law.)

Let us begin with a project we have been assigned. The project deadline is in two months. Regardless of what needs to be done, because of Parkinson's Law, we already know that we are going to cut it close, and it will fill all two months, regardless if we have ten tasks to accomplish in those two months, or one hundred tasks. Because traditional project management says, we go ahead and list out the tasks we have to do, and begin those which are on the critical path; or more than likely, the project will begin with those items that will take the longest.

Given our timeline, we already know that according to Pareto Principle, the tasks that will take 80% of our time will only yield 20% of the results. But when we apply traditional project management; what tasks do we start off with first??

That's right, those that will take 80% of the total project time to complete. So let's suppose that we have task A, and task B. Task A will take six weeks of our total eight weeks, and task B will take only two weeks. Because we feel that we'd like to have some buffer as a project manager (if you didn't notice it, the creation of a buffer has fallen us victim to Parkinson's Law, even with Hofstadter’s Law), we will start with task A first so that if we don't finish in the six weeks, we still have two weeks left as buffer.

But because of Pareto Principle, we know that task B is: 1) Easier to do 2) Can be completed in two weeks 3) Will account for 80% of the entire project.

But because traditional management says otherwise, we will start with task A, which is: 1) More difficult to do 2) More time consuming than we first estimated, regardless what the estimation is 3) Will take 80% of our time 4)

Will account for probably less than 20% of the project. So by week 6, task A is not completed. “That's ok, because we have an added two weeks buffer!!” You will say to yourself; but Parkinson's Law of course, kicks in, and you will take all eight weeks of your entire project time to finish task A (and of course, task A WILL be finished by the eight weeks because of Parkinson's Law) but when you have finished with task A, you have only finished 20% of the project.

Therefore, by Parkinson's Law, (and lack of Hofstadter’s Law) you will tell your boss that it wasn't your fault, and you need more people, even though you really only have 20% of the tasks left, you will now have more people working on smaller amounts of tasks than you did the previous eight weeks (Cope’s Law).

The lack of understanding of these two rules, Parkinson's Law and Pareto Principle, is pretty much the reason that most projects are delayed and over budget.

If you are a student, in your student life, if you had to clean your room before you did your homework, you will of course spend 80% of your time on cleaning your room to avoid the homework, and in fact, you will take longer than that because of Parkinson's Law. When you are done with cleaning your room, you will have spent 80% of your time, doing less than 20% of what you needed to do.

If you are in sales, you will spend 80% of your time rearranging and alphabetizing your business cards, and only spend 20% of your time making cold calls, which is what yields you clients, not the rearrangement of business cards.

When you understand this however, you will be able to spot it and thus be able to defeat it. I will show you later on, how by reversing the two laws, Parkinson's Law and Pareto Principle, you can do most tasks and do the more efficiently. You can spend as little as 20% of the effort, and 50% of the time, and yield a better
product all at the same time!

-------------------------------------------------

Createwealth8888:

How to spot Parkinson's Law and applying Pareto Principle to our investment strategies?

We should be more productive in our investment and avoid expanding our time and effort for more and more stock/company analysis which may take away too much time from other aspects of life even though we personally may enjoy it; but not sure our other family members can really agree to it.

Over time when we become more skillful and with the right strategies we should be able to spend 20% to get 80% .

Read? My money works harder for me (3)

Read? Is this worth my time and effort to trade? (3)

Parkinson's Generalized Law

Read? Parkinson's Law

Parkinson's Generalized Law ~ “You will always get the lowest item of which you deem acceptable.”

Is this Law true to me?

So far it is a yes for my profit taking targets.

I have specified that my profit taking target for short-term trading is at least $500 or 3%. So far since Nov 08, I didn't get anything lower as it is deem not acceptable.


During last Friday regular monthly lunch meeting with two friends (actually it is my friend's friend who became very serious in doing short-term trading and long-term investing and not my friend) to talk on investing and trading.

She has expressed interested in applying for some DBS NCPS 4.7%; but I advised her to forget it if she aspires to be a successful active investor. She must know what exactly she really wants from the stock market and keep training her mind to focus on her investing goals while improving her method and money management. That is the way to go.

Read? 3 Ms of Trading – Mind, Method and Money - Part 3

I believe any successful ACTIVE investors or traders will doubt their abilities to make an average of 4.7% returns on their investment in their respective investing/trading time frame.

So remember Parkinson's Generalized Law ~ “You will always get the lowest item of which you deem acceptable.”

Parkinson's Law

By Albert Yang


Parkinson's Law ~ “Work expands so as to fill the time available for its completion.”

Parkinson's Law of Finance ~ “Expense expands so as to fill available budget.”

Parkinson's Generalized Law ~ “You will always get the lowest item of which you deem acceptable.”

Background Blurb: (From Wikipedia)

“It was first articulated by C. Northcote Parkinson in an article published in The Economist in 1955, later reprinted together with other essays in the book Parkinson's Law: The Pursuit of Progress (London, John Murray, 1958), based on extensive experience in the British Civil Service. The scientific observations which contributed to the law's development included noting that as Britain's overseas empire declined in importance, the number of employees at the Colonial Office increased.”

While I have listed quite a few laws, just as according to Pareto Principle, Parkinson's Law will make up the bulk of this book, and it IS the 20% that will make up 80% of your daily battles. Understanding Parkinson's Law will probably be the single most important knowledge you have in your life. (No, I'm not kidding nor exaggerating). This law and its sole understanding will determine if you have a good marriage, if you have a great retirement, if your country is clean, if your life is happy, if you get a promotion. Singularly, it will so engross and encompass every aspect of your life you won't believe it.

Parkinson's Law, and its subsequent corollaries; are almost magical in its profoundness when you understand them. If you have a project, and you are given a month to complete it, you will complete it in a month. If you have the same project and are given two months to complete it, then you will complete itin two months.

Anybody who has ever been a college student understands this. While a paper is due in two weeks, most of us will do the paper the night before. If the paper were assigned and we were only given one day to finish it, we would all revolt against the professor, yet when you take a look at the reality of the fact, most of us actually do it in less than 24 hours all the time. So Parkinson's Law, as it applies to school and business, is fairly easy to understand and there are dozens of examples that could be sited. These however, are fairly clear and straight forward.

It is however, the subtle underlining forms of Parkinson's Law, those that we don't notice, that really ruin our lives.

Let me give you a few examples. Does your alarm clock have a “snooze” button? If so, and you use it, you are a victim of Parkinson's Law. If your alarm is set at 7:00am, and when it rings, you press the snooze button and “sneak” 10 more minutes of sleep in, you are now a victim of Parkinson's Law. You can almost call it the Parkinson's Law of sleep, “Sleep will expand to fill time available.” So even before you actually get out of bed, you are a victim to Parkinson's Law already, and it goes downhill from there.

Because you woke up 10 minutes later, you try to sooth your nerves by telling yourself that you have plenty of time; which of course according to Parkinson's Law, is another lie in and of itself. You say you have plenty of time, and so you slow down your morning routine, and bam! Parkinson's Law applies again, and your morning routine expands to fill (and then overfill) your available time.

Once you finally get to work, you sit down to answer ONE email, and then one email becomes ten emails, and soon, what you were suppose to do Monday morning is not done. So you say to yourself, “That's ok, I'll just put in a little overtime tonight, no problem.” But what you didn't understand was of course, that Parkinson's Law applies to overtime, and so by giving yourself overtime, Parkinson's Law kicks in once again, and the amount of work you do because you allowed yourself to do overtime is actually the same or LESS than if you didn't have overtime.

This all seems ridiculous, but it's true. If you are the boss of a company, take heed. In a survey of employees who worked 6 hours a day, 8 hours a day, and 10 hours a day. The SAME PERSON, working 6 hours a day, is MORE efficient and got MORE work done than working 8 or 10 hours a day!

How can this be?? It's a mixture of Parkinson's Law and Pareto Principle actually. Even if they had 6 hours of work only, if given 10 hours, they will automagically expand the work to fill 10 hours. So productivity goes down as does efficiency. This is further witnessed by the increased productivity of company CEO's who only go into the office three times a week; or even as little as one time a week compared to those who are at the office all the time.

I will talk more about this when I introduce Pareto Principle, and its combination with Parkinson's Law.

Understand one critical thing though, Parkinson's Law of time, does not shrink, it only grows. That means, when you have a project that is one week long, and later on, you find out you have two weeks instead of one week to finish it, then you will take two weeks. BUT, if you had a project that was two weeks long before, and you then are given only one week to finish it, your project WILL BECOME DELAYED.

So Parkinson's Law only expands, it doesn't shrink. I teach you later on though, how to make it shrink.

Read? Parkinson's Law of Finance

Saturday, 13 November 2010

Parkinson's Law of Finance

By Albert Yang

Parkinson's Law of Finance, “Expense expands as to fill available budget” is probably the singularly biggest reason that you will retire poor. Its defeat will also be the singular reason you will retire rich. A lot of people, who are making $2000 a month, will say “If I only made more money, things will be better.” What happens though, is when they make $4000 a month, or even $10,000 a month, they feel the same pressure, if not MORE pressure because as their salaries increased, so did their expenses. While not in so many words, the book

“The Richest Man in Babylon” by George S. Clason, teaches a method to defeat Parkinson's Law of Finance. By saving a fixed pE J'@ ECwU PJ\P d in their lives. It is so important that it bears repeating one more time and in all caps:

“PARKINSON'S LAW OF FINANCE, AND ITS DEFEAT WILL BE THE SOLE DETERMINANT OF WHETHER YOU ARE RICH LATER ON IN LIFE OR NOT.”

Consider etching that into stone and hanging it on your wall. With the modern methods of automation we have at our disposal, we really have NO excuse why we can't defeat Parkinson's Law of Finance. Going to Harvard, or getting a good job, these play at best- in their lives. It is so important that it bears repeating one more time and in all caps:

“PARKINSON'S LAW OF FINANCE, AND ITS DEFEAT WILL BE THE SOLE DETERMINANT OF WHETHER YOU ARE RICH LATER ON IN LIFE OR NOT.”

Consider etching that into stone and hanging it on your wall. With the modern methods of automation we have at our disposal, we really have NO excuse why we can't defeat Parkinson's Law of Finance. Going to Harvard, or getting a good job, these play at best, 3rd fiddle to Parkinson's Law of Finance as far as your wealth and poverty is determined. I've summed it up in one paragraph, but please don't let the volume of words fool you. I cannot stress it enough, if you have no solid financial plan in which to defeat Parkinson's Law, then no matter how much money you make, it will eventually become zero.


“The fool and his money are soon parted.” (Thomas Tusser) and how true it is! I believe Mr. Tusser was talking about the lack of understanding of Parkinson's Law. If you are still not convinced, look at movie stars of Hollywood and those who have gone bankrupt. They make, (have made) millions and still manage to blow it all away? Why?!? The answer, Parkinson's Law. If you get nothing else from this book, this point alone is well worth the price of the book.

So we've discussed Parkinson's Law and how it pertains to time, and money, but what about a husband or a wife? What about what kind of car you drive, or eating good food vs. fast food? How can all this be blamed on Parkinson's Law??

Simple, in its most generalized form, Parkinson's Law states that “You will always get, the lowest item of which you deem acceptable.” This means that if you think, “ugly” is ok, then your husband or wife will be ugly. If you think “I don't really care what we eat, McDonalds is ok” then you will eat McDonalds.

If you say “I don't mind if a job pays only $5 an hour” then you will get a job that only pays $5 an hour. Whatever item you deem acceptable, the lowest item on that list is what you will get. If you go to some place that is dirty, the reason that place is dirty is because the people that live there, deem that level of dirtiness to be acceptable, and therefore, generalized Parkinson's Law kicks in and that place is dirty.

If you “don't mind” that your future husband smokes, then your future husband will smoke. If you don't mind that your future wife is fat, then your future wife will be fat. If you don't mind that you eat microwave dinners for dinner every night, then you will eat microwave dinners every night. While this sounds almost ridiculous, it is not.

When you hear interviews or read books about very successful people, you will notice that amongst them, the commonality that they all will not accept substandard to be passed as par standard. Subsequently, they never receive substandard anything. Think of it like this, there is a hurdle, and you will always just cross over that hurdle. If that hurdle is low, then what you get is low, if that hurdle is high, then what you get is high. Do you want your house to be clean all the time?

Apply Parkinson's Law to it, and deem dirtiness unacceptable. You will be surprised how something as simple as raising the minimum accepted standard, will have a profound impact. I remember in high school, there was an English teacher I had who had a ridiculously high standard. Consequently, everybody stepped up their game, and met her standards.

If it's ok to leave the dishes undone overnight, then they will be left undone overnight. If it's ok that your kids bring home bad grades, then they will bring home bad grades. Parkinson's Law, as you can now see, controls almost everything around you. But it gets worse. Parkinson's Law is against every fiber of human nature.

For most of us, given a choice of difficult or easy, we will always default to the easy. That is human nature; and when you do so, you have lost the battle against Parkinson's Law. Like manna from Heaven, defeat of Parkinson's Law, cannot be stored like canned goods; its defeat cannot be accumulated like frequent flyer miles, and its defeat cannot be given to someone else like a well wrapped gift box. You and you alone can see your Parkinson's Law at work in your life, and only active daily effort can keep it at bay. It's harsh news, but it is reality, you can NEVER get rid of Parkinson's Law, but on a daily basis, with careful planning and help from other laws, you can at least keep it at bay. When you do though, your life will open up to a wonderful world filled with excitement and possibilities.

It is CRITICAL, that you understand this law, and its profound effects on your life. It is equally critical that you can SPOT this law before it happens, and prevent it from happening. Later on in the book, as I cover more laws, I will help you use a combination of things to defeat this law and in fact, use it to your advantage.

Continue to read next? Yang's Law in Investing

Yang's Law in Investing

By Albert Yang

Yang's Law ~ “Given two items A and B, of which you are an expert in A, and little about B, you will always invest more in B than A.”

Confidence Transposition ~ “People who are experts in one area, assume therefore they are experts in another.”

Background Blurb:

This law is one that I came up with after careful assessment of my own personal life and the problems I faced in my life. It stems from the observation that professionals, when they lose large amounts of money, almost never do so in their own field of expertise. They instead, invest more in areas they know very little about or are not in their field or scope of expertise.


Most authors write from the vantage point of experience that they have personally gleaned; and I am no exception. This has been a personal battle for me, and one that I am happy to share in hopes that by doing so, others can avoid the same mistakes I have made. The concept is simple to explain, but wrapped wholly in strange psychology. From Yang's Law, stems a corollary that is almost as profound, one that I aptly name Confidence Transposition. It is difficult to explain one without explaining the other, so I have grouped them together in hopes that it will increase your understand of them.

We shall start with the corollary first, and work our way to the law. Let's take someone we all know, the basketball player Michael Jordon. A legend in his own time, we may never see another basketball player like him ever again. Yet, when Michael Jordon retired, he tried out for the baseball team. Why would someone like Michael Jordon do something like that? The reason is, most believe (and wrongly) that if they are experts or professionals in one area, then they therefore can be experts in another area. This psychological conclusion, I have coined as Confidence Transposition: “People who are experts in one area, assume therefore they are experts in another.” This is why a large percentage of medical doctors play the stock market (and lose). They believe and say often, “I can do open heart surgery, how difficult can picking a few stocks be??” Consequently, most doctors invest in the stock market, and lose. Now we have a chicken and egg problem, leading us from the corollary to the law; while the doctor is an expert at medical practices, he knows nothing about stocks and finance; yet when it comes time to invest a large chunk of his money, HE WILL INVEST MORE IN THE STOCK MARKET THAN IN HIS OWN PRACTICE. This is then crux of Yang's Law: “Given two items A and B, of which you are an expert in A, and know little about B, you will always invest more in B than A.”

I am not a psychologist nor do I play one on TV, but this sort of behavior is unexplainable and yet happens all the time. This is the reason you hear doctors and lawyers, who are cautious when it comes to investments in their own professions; become a loose gunslinger with their money when it is a subject that they know little about. Be it a transposition of confidence on their part, of just a strange psychological phenomenon; one thing is for sure, Yang's Law applies to almost everything we do, and only through eternal vigilance can you really defeat it. Always work with your strengths and defer your weaknesses; it sounds like a simple concept that is well grounded, yet it is a concept that most of us never follow. Yang's Law, will be the reason people say things like “I love cooking; I don't know why I became an accountant instead of a chef.”

These sayings are simple admittance to being defeated by Yang's Law. Yang's Law, when combined with Confidence Transposition, spells almost guaranteed disaster; you will overinvest in something you really don't know that well; and you will justify it by saying that because you are an expert in A, you are confident that the choices you make about B are good. What is worse; to sell yourself on the false confidence, you will over invest in B, just to prove that you are an expert in it; (which you are not).

I can only share with the reader, that Yang's Law has ruined countless opportunities for me, understand it, and understand that NO, you aren't an expert outside of your field, and because of that, be cautious, and be overly cautious, never transpose your confidence and never invest in what you are not an expert in.

I want to let the reader know a few key differences about Parkinson’s Law, vs Yang’s Law. Parkinson’s Law, I liken to cancer or cirrhosis of the liver, it kills you slowly, day by day. Where as Yang’s Law, is like getting hit by a bus. You can be a doctor or a lawyer, be great at your profession, only to lose your entire life’s savings in ONE bad investment due to Yang’s Law. But be it death by bus, or death by cancer, both Parkinson’s Law and Yang’s Law will bring certain death to you (or make you wish you were dead) if you do not pay careful attention to them
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