Poker is an activity that has a lot in common with investing, although they are not exactly the same. This similarity is something that is often remarked upon.
What it boils down to is that both poker and investing involve risking money in the hopes of making even more of it. They both require people to make strategic decisions knowing that their own cash is on the line.
That basic similarity is why so many skills learned by playing poker can be transferred over to the investment world. The same is true in reverse too of course.
In this article, we will look at what those useful transferable skills are and how they can lead to wiser investments and poker plays.
Exploring the Similarities
At the heart of the links between poker and investing is the concept of risk – because with both activities that risk should be carefully weighed against the potential reward. One thing that a good poker player and a smart investor have in common is that they never take stupid or reckless gambles.
Such people do not put their money into bonds or stocks without carefully analysing the market first. Equally, they do not risk their poker bankrolls without considering the strength of their hands and that of their opponents.
That analysis can be difficult in the heat of live games, where there are multiple possible scenarios. When people are first starting out with poker, they often find online poker games easier to analyse. In those games, the only opponent is the algorithm – so there are fewer scenarios and less pressure.
Poker players must keep track of what is going on around them during a game and investors must also track the progress of their stocks or bonds. Both poker and investing have a peak time for cashing in.
Now let us look at the skills that can be transferred between the two.
Being able to keep a tight rein on your emotions is essential for either poker or investing, but neither activity makes it easy. It can be very hard to avoid feelings of euphoria or desperation in poker games, because the whole set-up is designed to magnify your emotions.
Something similar is true of investing, where success often leads to feelings of elation, while failure brings despair. That emotional rollercoaster is natural to both activities, but helpful to neither of them.
Making decisions under the influence of heightened emotions will lead to irrationality. With investing you can be tempted to buy impulsively – either to claw back losses or capitalise on success. But the smart strategy is to rein in those feelings and analyse the market calmly before making your next move.
Emotional control is even more vital in poker, because the other players will be watching you. Not only will you make bad choices, but they will be able to read your position based on your reactions.
Any decent player will tell you – that is a disaster. The key to success is being unreadable, which demands complete mastery over your emotions.
If you can manage to cultivate that skill through regular play, it will make you a better investor. You will learn the importance of sticking with a solid strategy rather than reacting impulsively to dips and peaks in the market.
If you consult with a financial advisor about investments, they will always advise you to diversify. By spreading your investment across different classes of asset, you lower the risk and increase the potential rewards.
No really sensible advisor would encourage you to put all of your money into a single investment. That is because if it fails you will lose everything.
The ability to diversify is a skill that can be useful in poker too. Unless you are blessed with a royal flush, it is bad strategy to go all-in on one hand.
Success can be a matter of staying in the game long enough to get that really good hand. Diversification will enable you to vary your bets and keep enough of your bankroll in hand for when that moment arrives.
That brings us neatly to the next transferable skill – patience. Playing poker often requires almost superhuman levels of patience.
You will have to fold on an awful lot of poor hands if you do not want to burn through your money, which is a common mistake made by amateurs. Gambling may not be identical to investing, but they are the same in that respect.
It is all about researching potential opportunities and waiting for the right one, which poker can teach you.
Poker and investing involve crossover skills, so if you are good at one of them it will improve your chances in the other.