Question About "Average Joe" Risk Tolerance ...

Discussion in 'Economics' started by Sunshine4ever, Sep 14, 2007.

  1. Let's say that "John" and "Bill" do the following to earn a living:

    "John" trades the futures contracts. His account is leveraged and he takes risks as he tries to benefit from price changes. For simplicity sake let's say that the time frame of its trades is medium to long term.

    "Bill" invests in real estate properties by flipping them.
    He too leverages (down payment for the houses) and takes risks (nobody knows where home prices are going to be few months or years down the road).

    My question is: why "Average Joe" believes that "John" has a riskier way of making money than "Bill"? :confused: :D
  2. Why? The general public doesn't properly understand futures trading. People are thirty times more likely to relate stories of how someone lost a lot of money in speculation than to talk about somebody who made it "big". People can see and feel real estate with their own hands and read in the papers how values almost always go up.
  3. 2ticks


    A slightly different question:

    How is trading riskier than opening a hardware store? Or opening a medical practice, or becoming a police officer, firefighter, or military man. Or, or, or.

    The answer: Like the markets themselves, perception, not necessarily reality, is the driving force.

    Open a hardware store, Walmart comes in. Oh yea, the local 20 year old KMart is turning into a Super K. But Ace Hardware still has it's location; on the truck-route!

    Open a medical practice, annual insurance costs are equal to 50% of your total school loan. And don't forget about that patient that was hospitalized. She told all her friends about how the ingrown toenail turned into gangrene, no thanks to you.

    I think I made my point.
  4. Because contracts expire worthless. When was the last time a house expired worthess?
  5. dont


    I can't short a house now can I so whats your point.
  6. Everyone knows futures are much more risky than real estate due to leverage and volatility. Massive fortunes have been lost on futures.
  7. Massive fortunes have been made and lost with real estate also ... plus the real estate market has its own leverage and volatility. The only difference is that there is no chart where you can watch it going up or down on a second/minute basis.:p
  8. My first assumption about your question is that the financial markets are much faster moving therefore people associate the bullet train speed of the markets with high risk. People could lose their money faster in the markets than real estate.
  9. A loss is a loss no matter at which speed it happens ... :confused:
  10. Not my point.

    You can lose money FASTER than investing in real estate, hence the reason most people find it riskier.
    #10     Sep 14, 2007