powersam
Senior Member
- Reaction score
- 19
dudemon said:FYI, it is quite common for investors mix up the probabilities of returns in their portfolios. For example, in their portfolio they may have 25% low risk, 50% medium risk, 15% medium to high, and 10% very high. It is likely the Replicel/Tricoscience venture lies in that high risk level, or up near it.
They include high-risk ventures, expecting (and knowing) that 9 out of 10 of them to fail within the first 6 months. Trico/Replicel is likely one of them. On the other hand, they are hoping that 1 out of 10 will be a 'home run.' The 'bio tech' bubble of today is a lot like the 'dot com' bubble a few decades ago, where 9 out of every 10 startups failed. So by purchasing a high risk venture, they are 'swinging for the fences,' as they say in baseball (but they are more likely to strike out).
Sometimes, investment firms may also deliberately incude high risk investments to use as a tax write off, knowing that it will go belly-up. I know US firms do that all the time and Canadian ones probably follow suit. So, in that sense, a "high profit potential" is not always the objective.
One does not put money into something because it is high risk, they put money into it because it is high risk but with the possibility of high reward. 9 out of 10 may fail, but you can bet every single one of those 10 had a the capability for high reward. Noone educated invests in high risk, low reward.
Could you give me one example of a company making an investment of this magnitude, planning for it to go belly up for a tax write off?