5 similarities between investing in stock market and playing poker
November 24, 2022 / 12:27 PM IST
Would you say poker and stock trading in the same breath? Many people cannot picture any similarity between poker and stock trading as the former comes across as a fun game, and the latter with people managing stocks and monies in business suits.
It’s time to break the bubble. One can draw several parallels between poker and stock trading. As per industry experts, poker can make a person good at stock market investing and vice-versa. Also, many top financial professionals such as Peter Muller, Ken Griffin, Kunal Patni and more are the biggest poker players too.
If assessed closely, you would find several similarities between the two. For starters, poker and stock trading involve skill, acumen and thorough learning and practice. To sum it up, here are 5 similarities between poker and stock market trading:
- 1) If you are a learner, start slow: If you are a beginner in the stock market, experts will advise you to read thoroughly about investing in stocks, not putting all the eggs in one basket and investing money as per risk appetite, short, mid and long-term goals. Likewise, a beginner in poker should study the game, skill him/herself, start with low-level stakes, take calculated risks and devise their strategy.
- 2) Risk-reward calculation: In the stock market, you don’t invest your monies randomly. You take a calculated risk, asses the company, check potential profits and losses, etc. You also decide on the best yields and do the math. Similarly, poker commands the same level of attention and thought process. You can’t play your cards randomly, you have to understand the situation, see the win percentage, and decide whether you want to fold or play further.
- 3) Play the long-term game: As industry experts suggest, stock market investors should not get buoyed by gyrating markets and they should look at the long-term horizon. They should beat the pressure and wait for the right moment. In poker too, you will feel the pressure, but you have to stay put. There is money at stake, so watch the game carefully, deal with jumps and handle pressure skilfully. Remember the tortoise and the hare story? Patience is the key.
- 4) Don’t copy anyone: What suits Warren Buffett, may not suit you. In stock market investing, you should not copy anyone and instead, invest as per your goal and finances. You should create your portfolio and re-balance it from time to time. Same thing goes for poker. Don’t try to imitate your opponent, even if he/she is a great player. Winners can lose too. Play your own game. Apply your skills, experience, past hands, etc., while playing poker, read the body language of your opponent and do what is favourable to you.
- 5) Don’t get misled: There’ll be times when a specific company will do great and you will make an impulse decision of investing in it. What if it posts losses in the next quarter? What if it doesn’t give you desirable returns? On poker grounds too, don’t jump tables. Poker is a game of skill and acumen and merely jumping tables won’t help you. Stick to your table and play the game skilfully.
In a nutshell, the psychology and skill behind investing in stock market and poker are quite similar, and if followed with discipline, both the areas can generate desirable results.
*This is a Partnered Post