A mindset that I’d guess every successful poker player has is that of maximizing gains. We’re not satisfied with taking “a lot” of money from our opponents, we typically want to extract as much as we can. I mutter disappointedly at myself if I fail to make a thin value bet on the river when I know I should have. The expected value may be measured in cents, but I want those cents.

Therefore, it comes as no surprise to me that many poker players are active investors of their capital. A lot of us are simply not satisifed with letting large chunks of cash sit in low interest bank accounts when there are better options available. And, frankly, I think poker players are well-equipped to understand and deal with the stock market, having already learned lessons that other people venturing into that territory have yet to come across. Like the concept of expected value and that being results oriented is often counter-productive. If an investment is sound based on all the available information, then there’s no point in beating yourself up over something that you could not have foreseen (scandal in the board of directors, or whatever). All experienced poker players know this already.

But while we may be equipped with a lot of the basic knowledge that ordinary people may lack in terms of understanding ROI, EV and maximizing gains/minimizing losses, we’re - as a group - probably a lot less risk-averse, which may be very detrimental. We may be used to daily laying 10% of our bankroll (or capital) on the line and we may be used to seeing a 20% increase in capital in a short period of time. At the stock market, such an increase usually takes more than a year for even a very skilled investor. Differently put, we may be impatient and therefore we risk taking some of our gambling gene to the investment arena.

I know I did.

But then I came across Ed Miller’s recommendation of Benjamin Graham’s The Intelligent Investor, bought it, read it through, and came out a new person in regards to investments. I can only parrot Miller’s recommendation and suggest that you read it, as well. It really is a great book. As with Miller, I recommend the version that’s commented by Jason Zweig. His commentary helped me a lot, at least.

Like I said, us poker players come armed with a lot of experiences that will be of tremendous help to us as investors, but also certain predispositions that may be harmful. Read this book.

/FP