Risk and Returns Part 1: What are your odds of success?

Statistics show that less than 50% of small businesses succeed. Statistics also show that 70% of mergers and acquisitions fail. So why do people choose to be entrepreneurs? Why do CEOs continue to pursue M&As?

This is because despite high risks, there are even bigger returns. In investment theory, the higher the risks being undertaken, the higher should be the expected returns. However, not everyone is rational. Gamblers are willing to take high risks, regardless the odds of success. Gamblers are ruled by greed and emotion, and the pursuit of thrill.

As an investor, you should take into consideration of risks, which is also the odds of success. Consider the statistics below:

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Compare the 4 leagues above: Which statistics provide the best odds of success?

After analyzing, you know the risks for each league. In Risk and Returns Part 2, we will discuss the theory of calculating returns.