Step 13. The (Investment) Flop

“Cut your losses and let your profits run” – well-worn investment proverb

“There’s no sin in being wrong; the sin is in staying wrong.” – another(!) well-worn investment proverb

The flop is the most essential part of a Texas Hold’em game and it is the stage where decision making skill is most important to ensure your success.  When playing starting hands you will only be playing hands that have high values but when the flop hits the value of your hand can change considerably so that you will end up playing a wide range of hands with values ranging from excellent to terrible.  It is crucial that after the flop has been dealt you can quickly evaluate your current situation regarding being favourite or otherwise and then play your hand appropriately based on strict rules.

Every investment also has a flop element to it, and how to define the flop is almost as important as knowing what to do at that point.  Knowing what to do at the Investment Flop is a critical part of successful investing because it will dictate in large part whether or not the investment will be successful.  Learning how to recognise what has happened on the Investment Flop and react to it will be a significant factor that influences your investment outcomes.

Unfortunately for both Texas Hold’em players and investors, hope generally dominates rational decision making at the flop more than any other part of the game or investment process.  If a player has two pocket cards that are completely missed by the flop the hand should be folded.  There should be no hope attached to possible improvements on the turn or river – this kind of decision making will only cause losses and emotional pain.  This is also true of investment, where if the outcome at the Investment Flop stage of the process does not match your original expectations you should exit the investment.

The best way to avoid poor decisions on the Flop is to continually question the reasons why you are still in the game or investment at that point.  Your answers to these questions will help to show you whether you should exit at that point or move on.

Great poker players keep asking themselves why they should stay in the hand and look for a reason to fold.  Great investors always question their security positions and try to find reasons for closing their positions.