Investing and poker are they comparable?

Investing and Poker have a lot of comparisons or things in common.

Even though investing and poker have many aspects in common, determining Risk vs. Return is the most crucial factor.
Covid gave me two hobbies, one is writing blogs and learning how to play poker.

Let me try to use instances from both of my experiences to see if investing and poker can be comparable.

Player A has been highly consistent and finishes in the green for the majority of sessions.

Player B typically makes a profit and plays to avoid losing money.

Player C has significant wins and losses.

Player D accumulated losses in every session and lost the most money overall.

Player A has been remarkably reliable:

Player A has been highly consistent and finishes in the green for the majority of sessions

Why?

Because he accurately calculated both risks and returns and because he does not allow a good or terrible session to significantly change his playing approach. A good player will read the player’s styles and plays his game accordingly.

While investing also, a person needs to read market cycles and accordingly align his portfolio. A person should avoid adopting a herd mentality when investing. Depending on the goal of the investment, each person needs to have their style. A greater understanding of the purpose will aid in determining Risk vs. Return.

In poker or investing, when prospects are good at opportunities, they take bigger bets. So, identifying the opportunities with conviction and backing them is crucial to generate alpha.

Player B:

Player B typically makes a profit and plays to avoid losing money.

Due to what may be a fear of losing money and a lack of expertise, Player B constantly plays it safe and misses out on a lot of earnings, even when there are possibilities.

In the realm of investing, it’s critical to identify the opportunities that the market present and to make investments in line with those prospects. Asset allocation is essential because of this.

Player C:

Player C has significant wins and losses.

loves to capitalize on the momentum and believes that everything revolves around his hand of cards. This explains why his wins and losses differed.

You must have checks and balances in place when investing to prevent a portfolio from deviating too much from the investor target. Effective risk management will increase your return.

Player D:

Player D accumulated losses in every session and lost the most money overall.

Should return to the drawing board before concluding that poker is merely luck and no skill and generally lost because of a lack of talent.

Instead of merely investing randomly in any opportunity that comes your way, it’s crucial to understand your risk tolerance and make the appropriate asset allocation to position yourself for the future. One must be quick on their feet to grab the opportunities whenever they present because no investment offers you the same kind of return every single year.

If you look at the above picture, no asset class has been consistently on the top. Repeating again Asset Allocation is here. It is the determinant of Risk vs Return.

Want to keep the blog short, will continue the further discussion in Part-2