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In the movie Dumb and Dumber, Jim Carrey’s character, Lloyd, asks the love of his life what his chances are of making her love him, too. “Not good,” replies Mary Swanson. “Not good like one out of a hundred?” asks Lloyd haltingly. Mary answers, “I’d say more like one out of a million.” Exclaims Lloyd: “So you’re telling me there’s a chance? Yeah!” It’s no different when you buy a stock or a mutual fund: Your expectation of scoring a big gain will typically elbow aside your ability to evaluate how likely you are to earn it. That means your brain will tend to get you into trouble whenever you’re confronted with an opportunity to buy an investment with a hot—but probably unsustainable—return.
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