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Top Adding - The Wealth Cost of Fear... and How to Overcome it
There has been a run of fascinating research into fear and the psychology of investing, some of it Nobel-prize winning, and much of it highly relevant to property investing.
In summarised form, what two Nobel-prize winning researchers (Daniel Kahneman & Amos Tversky) found was that:
1. people tend
In summarised form, what two Nobel-prize winning researchers (Daniel Kahneman & Amos Tversky) found was that:
1. people tend
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
to think and act in terms of gains and losses, rather than in terms of their wealth position, and
2. financial losses loom much larger for people than do financial gains.
Because of these two factors, people tend to be far more risk-averse than they actually need be, especially if looked at in te
2. financial losses loom much larger for people than do financial gains.
Because of these two factors, people tend to be far more risk-averse than they actually need be, especially if looked at in te
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
m of their own rational self-interest over the longer-term.
In fact, the short-term/long-term distinction turns out to be critical. In a 2002 interview in Forbes magazine, one of the Nobel researchers (Kahneman) pointed out that when you think in terms of wealth you are thinking long-term, and you
In fact, the short-term/long-term distinction turns out to be critical. In a 2002 interview in Forbes magazine, one of the Nobel researchers (Kahneman) pointed out that when you think in terms of wealth you are thinking long-term, and you
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
tend to be much less risk-averse.
Other research published in mid-2005 and cited by Forbes compared the investing performance of 'normal' participants and those with lesions to that part of the brain that controls emotions. In a simulated investment exercise the brain-damaged players made better in
Other research published in mid-2005 and cited by Forbes compared the investing performance of 'normal' participants and those with lesions to that part of the brain that controls emotions. In a simulated investment exercise the brain-damaged players made better in
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
estment decisions, meaning that they invested more often (where the odds favoured investments generating a net gain). The implication is that emotion interferes with investment decisions.
Put that together with the Kahneman & Tversky findings and what you get is that the fear of short-term loss wei
Put that together with the Kahneman & Tversky findings and what you get is that the fear of short-term loss wei
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
hs so heavily on people that they invest less than they would if they were following their own rational long-term self-interest.
This situation is highly pertinent to property investors. House prices in some cities (for example, Sydney Australia) have declined in recent periods (a short-term loss)
This situation is highly pertinent to property investors. House prices in some cities (for example, Sydney Australia) have declined in recent periods (a short-term loss)
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
while the same markets have nonetheless made impressive gains when viewed over a longer horizon (long-run wealth gains).
Every press report of property prices that shows a decline in prices – especially in the larger capital cities or the national averages which reflect them – fuels peoples' acute
Every press report of property prices that shows a decline in prices – especially in the larger capital cities or the national averages which reflect them – fuels peoples' acute
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
ear of loss, reinforcing their sense that they shouldn’t invest in real estate.
House price movements across all Australian capital cities over a recent 10 year period averaged annual growth of 8.6 percent. Add to this a crude (but conservative) estimate of average rental yield of 4 percent and you
House price movements across all Australian capital cities over a recent 10 year period averaged annual growth of 8.6 percent. Add to this a crude (but conservative) estimate of average rental yield of 4 percent and you
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
get a total gross return of 12.6 percent per annum.
Despite this solid performance, and with no reason to doubt its continuation, investors have abandoned property in droves, as shown by massive reductions in investor housing finance commitments.
The scenario where investors have abandoned an ave
Despite this solid performance, and with no reason to doubt its continuation, investors have abandoned property in droves, as shown by massive reductions in investor housing finance commitments.
The scenario where investors have abandoned an ave
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
age 12.6 percent annual return from property because of short-run capital losses mirrors the investment gains missed by the 'normal' research participants in avoiding short-run losses. How rationally self-interested is it to forgo a 12.6 per cent per annum return over the long run to avoid a minor s
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
ort-run capital decline?
Of course, no-one knows ahead of time that the average annual return on a property investment will be 12.6 percent. But there's a convincing argument that property’s solid performance over the long-run parallels the odds-on net gains generated by the investment in the exper
Of course, no-one knows ahead of time that the average annual return on a property investment will be 12.6 percent. But there's a convincing argument that property’s solid performance over the long-run parallels the odds-on net gains generated by the investment in the exper
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
iment with brain-damaged players.
Someone who is arguably more qualified to comment on investment risk and return (although not remotely inclined towards academic research) is Donald Trump. Trump provides another – but different – twist on the impact of fear on wealth. As he observed in his book
Someone who is arguably more qualified to comment on investment risk and return (although not remotely inclined towards academic research) is Donald Trump. Trump provides another – but different – twist on the impact of fear on wealth. As he observed in his book
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
The Art of the Deal:
"I like thinking big….Most people think small, because most people are afraid of success, afraid of making decisions, afraid of winning. And that gives people like me a great advantage." (Warner Books 1987)
So not only are people more afraid of loss than they are attracted
"I like thinking big….Most people think small, because most people are afraid of success, afraid of making decisions, afraid of winning. And that gives people like me a great advantage." (Warner Books 1987)
So not only are people more afraid of loss than they are attracted
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
to gain, but they can be afraid of gains as well!
What can you do to deal with fear? Here are five tips…
1. distinguish your fear when it is activated. Fear mostly operates in the background at an unconscious level. Our consciousness of fear – whether of loss or of success – is fleeting at best,
What can you do to deal with fear? Here are five tips…
1. distinguish your fear when it is activated. Fear mostly operates in the background at an unconscious level. Our consciousness of fear – whether of loss or of success – is fleeting at best,
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
ut it is necessary to recognise fear in order to not be held hostage by it
2. having distinguished your fear, choose whether you will be stopped by it. You are not likely to eliminate your fear, at least not in the short-run (many fears are rooted in biological needs for self-preservation). But you
2. having distinguished your fear, choose whether you will be stopped by it. You are not likely to eliminate your fear, at least not in the short-run (many fears are rooted in biological needs for self-preservation). But you
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
may choose not to be stopped by it when it is activated, and you are thinking big and pursuing your chosen course of wealth-creation
3. take a long-term wealth-oriented view rather than a short-term gain or loss perspective. A long-term investment horizon puts any short-term losses into perspective
3. take a long-term wealth-oriented view rather than a short-term gain or loss perspective. A long-term investment horizon puts any short-term losses into perspective
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
, and absorbs the effects of cyclical ups and downs. It therefore allows you to be less risk-averse, enabling you to invest more and create greater wealth
4. get in the habit of thinking big. Entertaining big thoughts may well activate your fear of success, but this will provide opportunities for y
4. get in the habit of thinking big. Entertaining big thoughts may well activate your fear of success, but this will provide opportunities for y
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
u to distinguish that fear, and place it in the context of the exciting possibilities which you are pursuing
5. ground your judgement in objective analysis and your actions in rational courage. Do the math. Identify various risks (market risk, interest rate risk, income risk etc.) and weigh them up
5. ground your judgement in objective analysis and your actions in rational courage. Do the math. Identify various risks (market risk, interest rate risk, income risk etc.) and weigh them up
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
relative to sensible estimates of returns. Trump counsels to 'protect the downside, and the upside will take care of itself.' Make safe bets. If it all stacks up, take the plunge and don’t look back.
Armed with this understanding, and by following these steps you’ll be in a much stronger position
Armed with this understanding, and by following these steps you’ll be in a much stronger position
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
o deal with your fear and to short-circuit its wealth-limiting power. Since other people’s fears provide opportunities for you, you’ll be poised to strike at attractive opportunities which were hitherto off the radar.
Do that, and you’ll be profiting from the same sort of advantage enjoyed by Trump
Do that, and you’ll be profiting from the same sort of advantage enjoyed by Trump
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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