Winning Poker Tactics Can Be Used in Investing

(Image credit: Enrico Fianchini)

One good way to think about managing your money is comparing it to playing poker, which is increasingly becoming one of America’s favorite pastimes.

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At first glance, poker and investing do not seem to have much in common. Wall Street requires a far different dress code than most poker tables, for example. But, as a longtime investment adviser who has won a World Series of Poker circuit event, I can assure you the skills you develop at the poker table can come in handy when it comes to growing your portfolio.

Party Poker, an online poker card room, compiled a list of the top attributes needed to be a successful poker player, and plenty of them will sound familiar to anyone who knows about investing. Going through that list, it’s striking how much winning poker players and successful investors rely on the same skills and attributes as they strive to take home more of the pot.

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Staying in the game

Money management, for example, is important at the poker table and in building a strong portfolio. A good financial professional needs a strategy to pick markets while never getting overexposed or taking too much risk for the clients they work with. The same holds true with poker players, who never want to have too much money on the table. Just as a knowledgeable financial professional does, a skilled poker player always keeps tabs on how much they have won and how much they have lost and, just as important, has a realistic take on potential gains and losses.

Be choosy in your hand selection

If they want to win more than they lose, poker players need to know how to manage their hand: what they have been dealt, what cards they want to lose, what cards they need to win. Almost no one is ever dealt a perfect hand. We have to play it skillfully to increase our odds for winning. The same holds true for financial professionals and their clients. They have to be picky about which strategies and financial vehicles to employ, so they have to do their homework and stay informed about market trends.

Numbers are the name of the game

Both poker players and individuals need to know the numbers as they gauge what cards to play or which financial decisions to make. They need to keep track of odds and always have the probabilities associated with success and failure in their minds. Poker players keep the odds in mind as they try to figure out which cards their opponents are looking for and what they need to win the hand. Of course, individuals do the same thing as they calculate the risks associated with some financial vehicles and how much risk they are comfortable with.

Be an eagle-eyed observer of human nature

The best poker players are almost always the best people watchers. They have to be as they attempt to read their opponents to see if they are bluffing and how they handle a good hand. This attribute crosses over into the stock market. Just like a poker player, a good financial professional needs to understand human nature and know how it can affect financial decisions.

The similarities between playing poker and investing in the market go far deeper:

Poker players need to know when to be aggressive to knock an opponent out of the game, but they also know when to be careful. Financial professionals do something very similar. They know when to get aggressive when it comes to the market, but they also know when to reel it in and focus more on preservation. Regardless of whether you have a seat at the card table or the stock exchange, you have to know when to start throwing more chips in the pile and when to hold back.
A shrewd poker player never plays the same hand twice in a row. They change their styles up, especially when they’re in a lengthy game or tournament. Similarly, every financial professional knows that diversification is important to expanding or helping preserve your portfolio.

It’s amazing how often Party Poker’s list of attributes of great poker players line up with common attributes successful investor. The same game plan that can lead you to win a big at the poker table can be used to claim even higher stakes: a more secure financial future.

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Kevin Derby contributed to this article.

Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor. SEC registration does not imply any certain level of skill or training.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Ryan Krauss is president and CEO of U.S. Central Financial Group. He has been in the insurance business for 17 years and added investment advisory services in 2013. Ryan believes in advising his clients the same way he would advise his own family, which creates lasting client relationships and many referrals.