Risk It All—And Win!

The urge to lay down cash on your Final Four picks or penny stocks is more primal than you think, according to a new study from the University of Kentucky.

Researchers wanted to look into the addictive urges at the heart of gambling and risk-taking. So naturally, they turned to . . . pigeons? Yes, pigeons. They had the birds choose between pressing a button that dispensed 10 pellets of food one out of every five times, or a button that dropped three food pellets with every press. Turns out, the birds chose the bigger, less predictable food drop over the sure thing more than 80 percent of the time.

The pigeons chose wrong: They’d get more treats with the consistent, small reward. But the birds—like humans—are drawn to big payouts.

It’s a primal instinct, the study shows: Since the pigeon’s brain is much less evolved than ours, the bird’s risk-taking tendencies are a sign that our own fixation with casinos and playing the lottery originates from a much deeper part of the psyche than previously believed, says study author Thomas Zentall, Ph.D.

That may explain why the kinds of things people dump money into while expecting a big payout often seem a little—ahem—bird-brained.

With that in mind, here’s how you can outsmart your inner pigeon the next time you want to make a risky investment:

The risk: Investing in a stock recommended by the talking heads on CNBC

The smarter move: Ignore Mad Money host Jim Cramer. A Northwestern University study found that the price of stocks recommended on his popular show jumped an average of 1.96 percent overnight—and then dropped right back down to their pre-Cramer value within two or three days. But the same study author, Joseph Engleberg, Ph.D., now at the University of North Carolina, recently discovered that looking at how a company’s ticker is trending on Google the week before its initial public offering yields a much better insight. “In our sample, the most-searched IPOs had an average first-day return of 17 percent, compared to 11 percent increase for less-searched stocks,” Engleberg says.

The risk: Buying a foreclosed house or fixer-upper for less than the cost of your car

The smarter move: Before you become the proud owner of a $15,000 three-bedroom Detroit bungalow, you should check to see whether the Motor City is on the rebound. The Brookings Institution has been tracking economic recovery indicators like unemployment and housing prices in the 100 largest cities in the world each quarter. Their most recent verdict: Some hard-hit towns such as New Orleans and Modesto, CA, are turning around, but Detroit and others are still struggling. As to whether any of those cities are great for guys, we’ve already looked into that for you.

The risk: Playing weak starting  hands in Texas Hold ‘Em

The smarter move: Learn how your  position relative to the “big blind”—the first person who has to lay down  chips and is therefore at the biggest disadvantage in the round—plays into how  good your hand is. As this chart from NoDepositBonus.com shows, being able to watch the other players bet before your turn frees you up to take more risks with your hand. If they’re not throwing in much money, it could mean they have weaker hands, making your potentially dicey pair of nines more playable. But if you had to already throw in money on the blind, don’t get caught up defending that deposit with anything weaker than a  pair of face cards. And here’s a simple tip for poker novices: Don’t play too  many hands—it’s okay to be selective if it leads to bigger payday. Want moreTexas Hold ‘Em advice? 

—Denny Watkins