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How Basic Mathematics Can Help You Make Better Investment Choices

How Basic Mathematics Can Help You Make Better Investment Choices

Introduction 

For long-term survival in this world you cannot solely depend on your job. For a smooth and comfortable future, you need to look at the different investment options available to you.

Today you have many investment options at your disposal.

However, not all of these options are necessarily the right path for you. For a secure future, you need to make your investment decision based on a lot of considered thought, as this is a decision on which your future depends. There are many variables that play a huge role in better investment decisions. In this article, our subject of discussion is basic mathematics – it can really help you in making the right choice of investment option.  

You Have To Be Good At Mathematics

“Monopoly was granted to the famous South Sea Company by the British Crown with the idea that the company would look after the war debt of the country.”

Technical analysis tells us that the famous Sir Isaac Newton lost his net worth of £20,000 (which is equal to £3 million in today’s currency) investing in stocks that were readily available to him. Monopoly was granted to the famous South Sea Company by the British Crown with the idea that the company would look after the war debt of the country. Initially, Newton made considerable profits and kept purchasing without realizing that the stocks had appreciated rapidly. The phenomenon caused a huge loss to Newton as the shares went back to their original price. 

The situation resulted in the famous quote of Newton in which he said that he can surely calculate the motion of heavenly bodies; however, he cannot measure the madness of men. The statement itself tells us how depressed Newton was. The moral of the story is that if you want to make perfect investment decisions then you need to know the art of basic mathematics. Yes, Newton had a good knowledge of calculus and it can surely solve a lot of issues, but calculus is useless when it comes to trades estimations. 

“Rest assured that in all investment fields you need to be good at math.”

When Mathematics Matters Most 

Rest assured that in all investment fields you need to be good at math. Let’s look at some examples of this. 

Arbitrage 

In arbitrage you need to judge if a cheaper option can be replaced with an existing investment. Since the investment has a known quantity, you need to calculate whether the substitute is a better option or not. The issue can become more complex when it comes to derivatives. 

Trading 

The situation is much the same in trading. When you meet the sellers and buyers of securities, the first thing which these companies do is conduct a mathematical test to judge prospective traders. The questions are not professional in nature; most of them are simply basic mathematics. If you want to establish yourself as a worthy trader then you need to show a proficiency in mathematics. To come up with the correct answers in the allotted time, you need to have an agile mind. 

Data Mining 

Data mining is another growing field nowadays. This is not a job for everyone; every year technological changes bring in new concepts with them. The point is that data mining requires both basic as well as advance level mathematics if you really want to be successful in it. 

Manufacturing 

The importance of basic mathematics reaches its zenith if you are planning to invest in a manufacturing facility. You need to be very good with numbers when it comes to calculating production cost, financial analysis and profit margins, etc. Yes, you’re bound to have experts within the organization itself who actually do all these tasks for you. However, when it comes to making all the right decisions you need to know at least rudimentary mathematics. Not knowing your numbers can cost you big time in today’s competitive environment. 

The Final Word 

Basic mathematics is a skill which you cannot take lightly. You need to have a firm grip on the figures if you really want to make all the correct investment decisions.

If you are not proficient in basic mathematics then seek services from someone who can help you in your investment decisions. However, this is also not a long-term solution; for long lasting success you need to get your basic math skills locked down. 

 

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