How good is your money maths?

PasturesNew

I just poked the mouse at any old answer.... as investing in stocks is of no interest to me whatsoever as I've never done it and won't be doing it..... but if I were doing it I'd quickly spreadsheet it to pick.

So, question/answer, was of zero interest to me, so I just shut my eyes and didn't even read the question.

hellybelly17

Ha ha. I got the answer right with a bit of thinking but it took me ages to work out I had to highlight the text to be able to check the answer at the top of here. Not that clever then.

happyinflorida

right, I know I'm thick as I can't even find the explanation or answer - I don't understand what Martin's written to find it?

Consumerist

A 10% gain turns £1 into £1.10 and a 10% loss turns £1 into £0.90

Scenario 1
1.1 x 1.1 x 1.1 x 1.1 x 0.9 x 0.9 x 0.9 x 0.9 = 0.9606 (~4% loss)

Scenario 2
0.9 x 0.9 x 0.9 x 0.9 x 1.1 x 1.1 x 1.1 x 1.1 = 0.9606 (as above)

Scenario 3
1.0 x 1.0 x 1.0 x 1.0 x 1.0 x 1.0 x 1.0 x 1.0 = 1.0000 (no gain or loss)

Scenarios 1 & 2 don't have same outcome as scenario 3 which gives the best return

Edit
Martin has written his explanation in white text on a white background so you can't see it unless you select the area where the invisible text is.

John_Pierpoint

fat-pudding wrote: »

I think you're wrong Martin, as you didn't take into account that if you owned shares then an amount of money would get paid as dividends.

In *theory* (and in the real world it's slightly more complex) but if you had 4 good years then 4 bad years these early good years might pay more in dividends which gives you 8 years to earn interest on the money. If you also take into account the rate of inflation your holding would be worth less money each year which would again back earning dividends earlier on.

But if the money had been left in the "Building Society" it would have given an annual yield of interest. In theory the share investment is more risky than the simple deposit interest, though in the current funny money market it may well be the other way round, 0.5% anyone ?

wildthing01

oh dear, wrong again (i get it wrong every time this poll come out). i got an A in my GCSE maths, but i am not very numerate or mathematical and this question and most of the 'explanations' above are utterly meaningless to me. i have no hope at all when standing in a busy noisy supermarket, trying to work out which deal is cheaper (but that's fine cos i have an app for that!) i let my husband do all the financial stuff, in a 1950's kind of way, and just have to trust that he's right! i'll have to test him on this...

Consumerist

wildthing01 wrote: »

. . . i have no hope at all when standing in a busy noisy supermarket, trying to work out which deal is cheaper ...

We tend to mainly rely on the price labels which, in most supermarkets, give you the price per kg or similar to compare against similar goods on offer. Saves having to use an app (calculator).

I've also seen an app which reads the bar-code on goods then comes back and tells you where it's cheapest. :cool: [Apologies - slightly off topic]

nickyotron

One thing the question doesn't tell me, do they mean the stock rises/drops 10% or the yearly returns. I've worked my answer as the % of returns rises/drops 10% a year. As you would with interest.Not stock.

So, I think its nothing to do with maths, just an understanding of stock markets and how stock works. If your fine with stock markets then its an easy question. If not, then it becomes a maths question, many get right, but wrong for the question. In my humble opinion:beer:

Utilityman

As a financial advisor for a couple of decades I resent your comment that 'the only people to make money out of financial advise are advisors'. I know my investment related advice has gained clients far more than I earned. Very often tax savings alone has been several times more than I made from the deal. Not all clients are investment clients, some are more about protections, sadly some of the products recommended paid out, saving the families from huge financial problems.

Yes, for the most part they could have got there on their own but would they?

Consumerist

Utilityman wrote: »

As a financial advisor for a couple of decades I resent your comment that 'the only people to make money out of financial advise are advisors'.

You have to accept, however, that FAs don't bear any risk associated with advice they give.

Although I am sure many of your clients have made more money from your advice than you have charged, what we don't know is how many have lost money by following your advice.