Congrats on the house being 'back in black'
The house yes.. but not all investors.
An interesting effect of investment dilution is that some investors who were in profit last time the site was at +1550 - are now in a loss once it's back up to +1550.
These investors were being rational in sticking it out - (because the site's luck at any point isn't dependent on what happened just before), but they lost out to investors who subscribe to a form of 'gamblers fallacy' and were 'lucky' enough to be less invested during the downside.
Sad that investors who provided the bigger slice of funds for the gamblers' wins - didn't necessarily reap the equivalent rewards for the gambler's losses.
'Luck' of the draw . It *could* have turned out in their favour I guess.
Interesting. I think it does make sense to lower your investment when site is up, and raise your investment when site is down. It may be motivated by erroneous gamblers fallacy, but coincidentally it also is the result of rational calculation.
When something is losing money, investors want out, and when something is making money, they want in. Independent of long term fundamentals. And indeed here too investment has been going up from 20k to 30k since the site went from -2k loss to +2k profit now. Before that when the site went from 2k profit to -2k loss, the investment also went down from around 30k to 20k.
This makes that there is more competition when site is up, and hence less possible returns, and inversely when site is down there is less competition and more possible returns. This effect is likely strengthened due to gambler behavior who do the inverse. They gamble more when site is down, because they think it's profitable, and gamble less when site is up, because they realize it's not. Making turnover higher when site is down, and lower when site is up.
I think the mistake made by the investor in your example is to invest when the site was up (and when there was less money to be made because of more competition in the pot and lower turnover). And a second mistake was to not invest more when the site was down (when there was more money to be made because of less competition in the pot and higher turnover). Hence the below average returns. If he would have done the inverse, invest when the site was down (and there was more money to be made), and invest less when the site was up (and there was less money to be made), his returns would have been above average.
So say the average return for sdice is 5% per month. Then one can have 0% or 10% depending on investor behavior.
