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Beginner Investing/Online predictit.org question

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Question
Dear Steve Hach,

I am new to this (and any kind of prediction market). I've only invested $10 so far. What does this statement mean? "A contract is an agreement between the buyers of opposite sides (Yes and No) of a prediction. Traders who correctly predict the outcome of the question will receive a $1 payout per share owned in that contract. Traders whose predictions fail will receive nothing. There is a limit of an $850 investment per contract."

Does that mean if I invested $10 on a "yes," which is the outcome, I would get $20 (minus fees, stated here): "Any time you sell a shares for a higher price than you paid, we charge a fee of 10% of your profit. There is no fee if you sell your shares at the same price that you paid or a lower price. There is also no charge to open an account with us or to deposit funds via credit card. If you wish to convert some or all of your balance to cash, we charge a 5% processing fee."

Do you think predictit.org is a fair/balanced site? If I feel almost 100% certain of something but can afford to lose about $200, what should I invest (how much) and what would my total payout be after their fees? I hope this is clear; I have no experience and don't quite understand how much people have to gain from this kind of thing.

I appreciate your help in advance.

Best,
Elizabeth

Answer
Hi Elizabeth,

Sorry for the delay in my reply, I was not aware of any pending questions before i left on my vacation.

By your description of the system I feel that you have the proper understanding of how the site works.

But, do not delude yourself with words. You are not "investing" in anything here. You are BETTING, plain and simple.

Keep that in mind.

In any case, "yes"--by my read of the info you sent-- if you bet $10 you will win $10 on that bet and receive a total back of $20 minus various fees. So, you would get $18 total ($20-10% fee of $2)or a profit of 8$. But, they are also going to charge you 5% to take the money back (convert to cash.) so you are looking at receiving even less.

If you bet $200 and won you would be looking at $380 and then if you converted to cash they would take another 19$ or so you would have less.

And, how will you get the money to them? Will you send cash? Or will you use a card? Any fees there? That also subtracts from your bottom line.

My question to you is why would you want to do this?

Why not just bet with a friend who has the opposite view and skip all the fees and such?

Or, better yet, why gamble at all when you only have $200 to spare?

Can you really "afford to lose" the $200?

Shouldn't you put that $200 in the bank for an emergency, or pay some credit card bills, or use it for home or car repairs, or college money for children or a nice dinner, or vacation, or something?

I don't understand why you would want to bet on politics or sports, or anything for that matter if you don't really have money to burn.  You wouldn't walk into the street and throw $200 away would you?

There are no "sure things" and betting is not really a good thing to be involved with online.

So, my advice is skip this website and keep your cash.

If you really want to bet, find a friend who will match you straight up and just bet $200 with them. Probably more fun, less hassles, better for your bank account. And if/when you lose, I think it will be more of a lesson when you have to physically count out that lost $200 and put it into their hand.

And, if you win, it will be more fun when your friend has to count out the money and put it into YOUR hand.

Again, sorry for the delay in my reply. I was traveling and forgot to set the vacation schedule with the system.

Best,
Steve  

Beginner Investing

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Steve Hach

Expertise

I can field general questions about the stock market and investing. The best ways to analyze stocks for investing, general financial questions about the markets, and questions about companies.

Experience

I am a research analyst for a quantitative stock market research firm. I also have extensive research, writing, and teaching experience in the field of US history with an emphasis on US foreign policy and international relations.

Publications
Various newspaper Op-Eds "Cold War in South Florida Historic Research Study" US Park Service, 2004

Education/Credentials
BA in US History and French MA in US History PhD ABD in US History

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