Gambling for Fun and Profit

July 26, 2007

I’m not a big gambler but it is fun to get together with some friends and play poker when we get a chance.  I have written before about the three investment rules that apply to Texas Hold’em and was reminded of them during our game last night

– Know When to Fold’em
– Know Your Odds
– Be Patient

Know When to Fold’em
I probably folded just as many hands as I played last night. Sometimes the hand starts off looking great with an ace, king but then the flop comes and you realize you have no hand at all.  Psychologically, it’s tempting to stick around and chase another king or ace.  Who knows, you just might get lucky.  But following my strategy of playing a tight game, it makes more sense to fold’em at this point.  It is hard to do, kind of like selling a good stock gone bad, but it makes the most sense.

Know Your Odds
I’m not experienced enough to know the odds of each hand but I can reasonably judge the risk reward relationship on many hands. If I’m dealt an 8, 3 non-suited the odds are good that I won’t have a winning hand.  If the betting is low I could try and stick around, hoping to make two pair on the flop but the odds tell me to save my money and wait for a better opportunity. 

You can try and calculate the odds for a company’s performance by looking at their financial statements and outlook for the future.  If the last several years have been poor and the outlook is grim, odds are the company’s stock won’t do so well over the next period.  It may be better to keep looking for a better buy elsewhere.

Be Patient
It seems one of the biggest mistakes in Texas hold’em is to get impatient.  If you are not getting good hands you might start betting on cards you normally wouldn’t just so you can play. Being patient can help prevent losing your money on hands that just aren’t quite good enough. 

Patience is also a virtue in investing world.  As I’ve said before, poker games are won one hand at a time, just like investment portfolios grow over time with smart, steady investments. Don’t bet all your money on the first three hands. In other words, don’t approach investing with the attitude that you’ll get rich quick. Steady investing over time leads to wealth.

Manage Your Risk
Hanging out with the guys was fun but it was even more fun because I won the card game! Walking away with a small profit is always nice but it’s good to start the game with the expectation you might lose it all. This is different than investing because you never want to lose it all in the stock market; that is why diversification and allocation are so important. You really could lose all the money you invest in the market but if you diversify your holdings, the odds are you’ll come out okay.  If you set your expectations about how much you’re willing to risk and how much you stand to gain when you get started investing, watching your portfolio rise and fall will be much easier on your psyche over the years.

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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Comments

9 Responses to Gambling for Fun and Profit

  • Ben

    Good point Tim. A skilled player can bluff you off a good hand or push you out with aggressive betting. I’m not that good, I just enjoy playing. The art of reading people, betting, and bluffing seems to be something you pick up after you’ve played the game awhile.

  • Tim

    poker is more about outplaying your opponent than what the cards are. odds are truly secondary.

    just be cautious if you are a compulsive, addictive person.

  • Ben

    Well, now you’re ready for next time Art! I find if you play tight you can usually hang around pretty long. If you never hit a big hand the blinds will eventually eat you up but the longer you play, the better your odds of finally getting a winning hand.

  • Art Dinkin

    Sage advise Ben. Now I wish you would have offered it before my group played on Monday night. Third loosing session in a row. 🙁

  • Ben

    I know what you mean Blaine but I had pretty good cards last night for a change and a lot of the hands fell my way early so I played more hands than I normally would. I agree with you, on a typical night I fold way more hands than I play.

  • Blaine Moore

    If you folded as many hands as you played, then you were playing way too many hands.

    I am happy if I am in the pot once each time around the table, and my goal is merely to make my blinds each time around. If I don’t have cards, then I will take the hit, because the hands that I do play are going to generally bring in quite a bit more than the blinds.

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