I used to love to play Texas Holdem Poker. I still do, but I also have to know when something starts to become habit forming and possibly not healthy. Believe it or not, but there are a lot of things that investors can learn from poker players that will make you a better investor in the long run. You can learn how to invest money like a poker player.
There are a lot of similarities between the two. Here are ten attributes that I wanted to highlight how to invest money like a world class poker player. There are some great insights that can be drawn from the world of poker and applied directly to investing. Here are a few of my favorites.
How To Invest Money Like A World Class Poker Player
Know When To Hold’em
Like the classic Kenny Rogers song, The Gambler, you have to know when to hold them and know when to fold them. Of course, Kenny was talking about the cards that you have in your hand. But, the same can be said for stocks or even mutual funds. You have to know when to keep them and when to sell them.
Do you have a strategy? Did you buy a certain stock for a certain reason and you’re waiting for it to pan out? These are all things that you need to consider when investing just like a poker player thinks about when he or she sits down at the poker table to play.
Know When To Fold’em
There is no shame in calling it quits with a certain investment that did not pan out. It is often better to live to fight another day than to go down in complete flames with all of your money. Jim Cramer recommends in his book, Mad Money
, to set a certain percentage (say 10%) of a loss as a trigger for you to automatically sell a position that you have in a company’s shares.
While Cramer’s book isn’t one of my top ten personal finance books that should be on your bookshelf, it is definitely well worth a read especially for people investing in individual stocks.
Play With The House’s Money
This is one of my favorite things to do when investing. I will often sell a position that I have had a lot of success with and get back my initial investment. Then, I will let my profits continue to run.
This is playing with the house’s money, the casino’s money or other people’s money…not your’s. This is also akin to using the interest that you earn from an investment to earn passive income and reinvest the proceeds into new investments. This is exactly what I do to earn a passive income with Lending Club. You can learn how to invest money.
Patience Is The Key
It takes patience to land on that incredible hand in poker. If a player is playing tight or only playing the best pair of cards, he or she could wait a while to strike. The same of course can be said for investing. You may have to stalk a company waiting for a pull back of its stock price to pounce on it. You may have to be patient to let your strategy play out.