Poker is not just a fun hobby played by people with too much time. If played regularly, it can arm you with the skills to become a perceptive investor, like Carl Icahn, Steve Cohen, and David Einhorn. A recent study by Sugata Ray, Sandra Mortal, and Yan Lu found that hedge fund managers who won significant amounts of money in poker also had 1% to 5% more returns on investments compared to those that did not.
These findings clearly suggest a correlation between poker skills and investment skills. If a person wins money in poker, these same skills can carry over and help gain money in investments. Here are four things you can learn from poker that will make you a better investor:
Betting without emotion
Investing without emotion is so important because you need to be able to assess if the opportunity to gain money is based on logic and analysis, or if you are simply reacting out of panic. While placing a bet is not exactly the same as making an investment, both elements offer an opportunity to increase your money. Therefore, learning how to place a bet and later increasing or calling on a bet without emotions may be likened to controlling your emotions when you decide to increase, decrease or hold on to your investment positions.
Learn a mathematical approach
Many amateur poker players often jump into the game bringing with them a blind baseless hope to win with no real plan for success. On the other hand, the professionals always have a plan because they understand the mathematics behind poker. Poker players learn that success can be predicted based on the laws of probability and statistics that translate into risk assessments to make calculated risks.
These same mathematical principles can be applied to one’s portfolio of investments. The basic rule for the experts is to take risks when the odds are in your favor, and the potential gain can immensely offset any losses.
Find out where your expertise lies
Good poker players should learn to discern security, quality, style, and positions. The best way to do this is to try playing different games which can be good practice for finding the right investment platform or financial services provider. There are many different poker games to choose from –Texas Hold’em, Five Card Draw, and Omaha Poker to name a few. One should learn where they’re best at and keep practicing to maximize their skills in that game.
Have a humble mindset
In poker, your mindset is everything. Some of the most valuable tips from poker pros actually concern one’s basic humility and mindset rather than in-depth strategy. Humility requires oneself to admit that you are not perfect and there are still areas you can improve on. For instance, many poker players make a list of their mental strengths, weaknesses, and things they need to do to get better. This honest self-assessment and openness to change sets the pathway for transitioning from a beginner towards becoming an expert. As with investing, a humble investor is a cautious and prudent investor who will not make rash decisions, a trait that is highly valuable in this field.
It is in poker where the game mimics life as it gives you valuable life skills that you can apply everywhere, in this case, in investing. By honing your skills in playing the game, you are also steps closer to making better investments.