Quarter Life Crisis

I typically associate the quarter life crisis with twenty somethings in search of a passion and career direction after finishing the schooling chapter of our lives. But in some cases, especially with a childhood prodigies, we typically skip the quarter life crisis and see a premature onset of a mid life crisis at quarter life.

Kate Bosworth’s crisis appears to me to be more of a mid-to-later life crisis, the kind that you have towards the the mid to later stages of your career when you realize “wow, where’d all the time go?”.  In her case, she’s been acting since she was an early teen so I assume that she’s already found a passion and career path.  So I see this as a case of premature aging - her “quarter life crisis” is  more like a mid-life crisis rearing its ugly head at quarter life….  Hollywood seems to do that to a lot of people.

Other more obvious cases: Britney, Home Alone kid, etc.

IN ITS recent semi-annual World Economic Outlook, the International Monetary Fund sees few silver linings in the storm clouds gathering over the world’s richest economies. The world economy as a whole is expected to grow by 3.7% this year, well down on the fund’s last estimate in January of 4.2%. America is expected to enter a mild recession this year—its growth forecast has been cut from 1.5% to just 0.5%. The prospects for Spain, Canada and Italy are also gloomy. But the forecast is sunnier for the developing world, whose economies are predicted to grow by 6.7% in 2008, led by China and India.

Source: The Economist, April 14 2008 

SO you’re young, you’re in your 20’s, no kids, no responsibilities. Financial advisors may tell you to “take risks since you’re young.” However, inherently you are risk-averse. Want proof?

Let’s play a game –

Fair Coin. When it gets a “Head” the game is over.
The payoffs are as follows:
Head on the first flip = $2
Head on second = $4
Head on third = $8
Etc.

Expected value of Game = (1/2) * $2 + (1/4) * $4 + (1/8) * $8 + ….. = $1 + $1 + $1 + …… = INFINITY

Will you pay me your house + car + xbox360 (everything you got) to play this game, with an expected value of infinity?

I don’t think so.

In fact, the majority of investors are risk-averse. If all investors were risk-neutral, the returns of all investments would equal the risk-free rate.