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Get Rich Courses

>> Sunday, October 11, 2009

Open the newspapers and you will notice the increasing number of advertisement screaming the latest "Get Rich" courses offering passive income with only a few minutes a day.

I took the time to attend a few of these free preview seminars with an open mind.

In general, I found a few similarities.

  • They all promised a success rate of between 70% to 80% if you use their strategies to trade. (They keep emphasizing that it is not 100% accurate. In my opinion, it is so that if you do not succeed, they can tell you that you belong to the 20% that failed.)
  • They highlighted the testimonials of their highly successful graduates.
They all started their seminars with explaining about probabilities and proper risk management. So, now I would like to apply those concepts to the above 2 statements.

In general, trading involves winning and losing. If the market moves in your favor, you win; conversely, if it moves against you, you lose. To put it simply, it is a 50% chance of winning by sheer luck. However, there is a brokerage fee or commission charge for every trade, which means you need to win about 55% to 60% of the time to break even. (The house always wins!)

Using the claimed success rate of 70%, it only has a 10% upside. And compared to pure luck, a 20% better chance. Therefore, it will be too risky for me as I would like to have at least a 85% success rate to prove that it is significantly better than gambling based on luck and have an upside of above 25% after trading charges.

As for the claim of 70% to 80% success rate, the proof would be the number of graduates successful testimonial over the number of students attending. They boast cohort sizes of the thousands, but the number of success stories only in the tens. That works out to less than 1%.

No doubt, they will argue that they are only highlighting the top graduates and that there will be too many to show all. So, how about showing the statistics of successful graduates? If it were really above 70%, I am sure they would blast it on their advertisements already. Another tell tale sign is the small number of "mentors", i.e. previous successful graduates, who are guiding the new students.

Based on probability, having 1% of attendees succeeding based on luck is not impossible. It's like asking 10000 people to buy 4D from 0000 to 9999. There will definitely be 23 winners every draw. Now, if the same 10000 people buy 2 draws, having the same person win both draws is a whole different probability. So, did these success story graduates continue to prosper? They do not seem to be any of the "mentors".

My view may be very skeptical, but with all the above considered, the down side risk of wasting $3k plus and time is far greater than the small potential up side of 1% chance to succeed and 0.1% chance of succeeding continuously.

Applying the strategies that they shared during the seminar, I should not invest in this as their is no clear "buy" signal and "stop lost" by cutting my loses of further time loss attending.

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