Playing the Stock Market and other Games
Great read Jared. I place it well above the mediocre line.
I think you will be successful in your investing strategy. People who fall into the “This is an easy way to make money” are the same as those who “win big” gambling and bet all of their winnings since they can’t lose. The “high” of winning or a natural tendency toward addictive behaviors clouds their judgement or they never learned how to manage winnings.
Gambling involves chance, a casino’s understanding and use of “the odds” (they never lose money) or someone better than you showing up at a card table. “Creative Play”, often known as cheating can be employed to beat the odds if you believe you can beat the odds of being arrested.
Playing the Stock Market is essentially a game with similar basic underlying concepts No “wise investor” advice here since I don’t have the energy needed to keep ahead of the “game”. The stock market, like many strategy and most card games require the ability to think, remember, understand the players and plan ahead.
These techniques have helped me annoy in-laws to the point of frustration in their no money card and board games. They would keep a lifelong (kept, till I joined the family) track of their wins and losses. I loved to “play with them” since they were all so serious about their “fun” games. That alone gave me a great advantage. My strategy was to always stay detached and focused, even when my wife kicked me under the table. I was able to successfully win big or lose big in any game that involved more than chance, depending on my mindset at the time. “Extreme losing” was my favorite tactic since it annoyed everyone the most. It was not due to intelligence (most games only require an average intelligence), but a combination of knowing the rules, the other players, their style, what had been played and of course the alcohol consumption of the other players (I didn’t say that.)
Playing the stock Market has the same concepts.
- Treat it as a game and have fun.
- Stay detached and focused. Making money is a distraction and often gives you a “I‘m going to get kicked in in the leg soon” feeling. You start to expect negative consequences for winning which are distracting.
- Always stay calm. Anger, frustration and even elation throw off your think/feel balance. Emotions are used to throw an opponent off in most games. I wrestled (very briefly) my freshman year in High School. My strategy was to throw my opponents feelings off before we got to the mat. I wrestled mostly jr varsity, but I wrestled once on varsity. It was against a senior who was 3 weight classes heavier than me (coach would have sacrificed me over forfeiting the match). My usual pre-match banter did not seem to have any effect, until I heard him berating a gay guy. (Ah, Lights on!) I started to look, point and flirt with him using “stereotypical” gay gestures (no disrespect intended). As we approached the mat, he appeared agitated, so I nicely but loudly said “You want to take me down lover boy!” His agitation turned to rage when his teammates chuckled. My fingers running across his palm after we shook hands, I believe, was what caused him to become totally “un-glued”. I won the match only because I was calm and focused and he was not.
- Know the rules, who the other players (as groups) are and what techniques and patterns they follow. This requires your attention to buying and selling patterns, events that effect stock prices or buying and selling stocks. Plus know everything you can on what you are allowed to do.
- This is a big one. Don’t listen to experts (not meant as a putdown) who are active traders, brokers or making big money off the market. They tend to place their trading secrets above sharing insight. The one comment that bothers me the most is: “Hold onto your stocks, prices will rebound”. That is such a worthless advice. Sure, that may be 75 years from now, but I am retiring in three. The “dot com” disaster is one time when I heard that advice often.
- It is impossible to have unlimited stock growth. This planet has a fixed amount of resources and space. This seems like a “Duh!” observation to me despite what many Economic and Macroeconomic professors try to convince you of. A full deck of regular playing cards is considered fifty-two cards (and 2 jokers). No matter how much I believe there are 66 floors (oops, wrong story) cards, there are only 52. I always play with a full deck, though some people may question that! This is “basic common sense”. Also, my dad had a jar full of pennys (not collectable) we used them as chips to bet in a card game. We gave each penny a value; nickle, dime or one hundred dollars(as kids, we liked to bet large amounts). No matter what value we assigned to those pennys, in the jar, The jar only held a fixed number and their value did not change. A good friend, respected economics professor and very smart person did not agree with this concept. We had “intellectual banters” on the subject of stocks quite often (though I never studied economics). I would tell him to to get his money out before the Stock Market re-aligned itself with reality. He said that won’t happen. He didn’t and it did. He lost everything. (I was nice and refrained from saying “told you so!”).
- Avoid being driven by winning. This destroys people. Those who have won at sports, poker, or any game since they were young. I was a top of the honor roll student till my sophomore year in high school. I then realized it doesn’t matter if I am at the top of the class or in the top 10 (never got that low). There was no reason to try to be the very top. It took away my self imposed stress (I really got didn’t get stressed by anything, but it made a difference). It was unconsciously being driven by winning. Top College athletes, consumed with winning are devastated when they, as seniors, wait for a pro contract that never comes. They give up on life and start selling vacuum cleaners door to door. When they finally gets to coach a hockey team of 5 year old kids. The first team they play, coached by a mom who is usually nursing or changing one of her kids and knows nothing about hockey, defeats them 5–0. (I exaggerated a bit to make my point).
This is my view of “playing” the stock market. It appears you are well aware of the risks, but have the right attitude. It takes some skill, but the “chance or risk factor” is always there. You cannot predict every eventuality that may affect your stocks, but understanding and accepting the likelihood of some stocks failing is part of your game.
In college, I would chance “sluffing” my high card, in a game we played, in hopes the other players would give up the cards I needed to win. It worked 80% of the time. In 20%, luck or chance in the deal placed all the cards I needed in one persons hand and caused my best plays to fail at times.
I did one thing to avoid losing everything after winning. I would set aside the original number of pennies I started with. That way, no matter what chance brought, I always broke even at the end.