Engineer's Finance

Please Read Part I and Part II before reading the conclusion.

Insurance policies are designed taking advantage of this psychological bias – we don’t see the reality, we end up taking our investment decisions on what is presented to us, not what we need or understand. The job is very well done by agents and brokers. They may not be aware of making profit calculations, or in judging whether this policy is good or bad for the customer, but they gradually become experts in taking advantage of psychological biases and mentioning about the circumstances in which we may need a particular policy. Continue reading →

Please Read Part I before starting the second part.

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Let me give you another set of options:

Case B:

Let’s say you own a motorbike which you really love. There is a 25% chance that your motorbike will meet an accident and will require repair cost of 200 Rs, while there is a 75% chance that the motorbike will not suffer any accident. So here are your two choices: Continue reading →

Something Interesting about Insurance Policy. I have always wondered how the Insurance works and I have written previously also many articles regarding the same. This is just to give you a better view of things.

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Let’s discuss some case studies here:

Case A:

Suppose I give you a choice to make of the 2 available options:

1. A bet in which you will surely loose 50 Rs. (100% chance of loss)
2. A bet with 25% chance of Loss of 200 Rs, and 75% chance of Zero Loss

Which one will you choose? Think about it carefully, before making your choice and before reading further.

Some people select choice 1, other select choice 2. What have you selected? Continue reading →

As most of you are aware, Warren Buffet is known for his investing skills. He is acknowledged as the World’s Best Investor. You can get loads of information from the net regarding the guru of investment. He owns the “Berkshire Hathaway”, which a billion dollar company. He shares his secrets to the whole world on the day of Annual Meeting. His Annual meetings are generally attended by more than 50,000 people. It is always a pleasure to read the annual statements from his site. I would urge you to have a look at it. Continue reading →

Representative money is symbolic money. it does not consist of coins or rupees, but of tokens or certificates. These tokens or certificates can be exchanged for a fixed quantity of gold, silver, water, oil or food. Representative money is directly linked to the commodity that backs it. Continue reading →