What can investors in stocks and shares learn from poker players?
Whether you are a seasoned investor or are just starting out in investing in stocks and shares, you will probably have identified that in order to succeed in the stock market, certain skills are required. You’ve probably also recognised that these skills can be further applied to other areas of business and investment.
However, you may or may not realise that there are many key skills and qualities that investors can learn from the likes of poker players, who also assess risk and the potential return on a regular basis.
Poker players are proactive and fast learners, often studying prior practices in order to have a greater chance of receiving a positive return on investment. Whether this is achieved by studying a competitor’s strategy or reviewing historic data, would-be investors can certainly take a page out of the poker player’s book for being fully-prepared for the next important move. Keeping calm under pressure is also vitally important, as not keeping calm can lead to dubious and risky decisions.
Both trading and poker are based on probability, which is why it is important for both players to not only research and make an informed plan based on this, but also still have the foresight to be able to adapt to any unforeseen eventualities. No matter how proficient you are as a poker player or how skilled you are as an investor, you can never be 100% sure that you have the right hand or the right stock portfolio.
Risk is a key element to any investment or game of poker, and both players need to have confidence in managing that risk. Making decisions based on incomplete information of what works is imperative and can make a significant difference with regards to success in either in investing in the stock market or at the poker table.
Like poker players, investors shouldn’t rely on hope and good will — this won’t get you anywhere. Poker players don’t rely on getting that all-important card, they have a defined strategy in place for all eventualities. Investors should instead invest in companies that have a growing market share and increasing profits.
One of the worst things a poker player can say is “I would (or should) have won”. The same rings true for investors. It is unwise to undertake any form of investment or poker game while thinking about what "might have" been.
In games like poker, attaining the best possible hand is often referred to as “the nuts”. This is much like when you have invested in winning stocks and shares, and your aim is to continue to ride the wave as your chosen shares soar above and beyond what was initially expected.
Being skillful is key for both poker players and those who play the stock market. For both, learning and understanding mathematical probabilities and the odds of success are key to yielding strong rewards.
At the opposite end of the scale, like our poker playing friends, sometimes things just don’t go your way, and when this happens (and you don’t have a planned exit strategy in place), sometimes you just need to “fold” — in an investment scenario, this simply means looking to sell and make a sharp exit.
For both investors and poker players, doing more of the same is always wise if it is working effectively for you. If playing a tight game (whether it’s with poker or stocks and shares) is producing positive results and you are coming away with profits, then keep doing what you are doing. The key to success in both poker and investing is being confident enough to handle any given situation and to be able to make important strategic decisions under pressure. If you are an investor who has never played poker before, you may find that this will help enhance the skills that you utilise for your equity investments, and you might even develop new ones, too.