Step 1. Texas Holdem Vs Investing

“All I bring to the party is twenty-eight years of mistakes” – investor quote in Market Wizards

Before you learn how to play Texas Hold’em poker well and then find out how playing this exciting game can help turn you into a skilled investor, it is important to understand the reason why Texas Hold’em poker is such an effective medium for acquiring practical and usable investment experience.

Peter Lynch – one of the most well known US money managers – has written that one of the most valuable educational tools for a would-be-investor is playing poker. Other investment titans also have great regard for the skills that an investor can learn from playing Texas Hold’em. These include Bill Gross – the chief investment officer of PIMCO, the world’s largest bond fund and generally regarded as the world’s top bond investor and Bill Miller, the manager of the Legg Mason Value Trust who led the fund to beating the S&P500 index returns 14 years in a row (although he seems to have gone on tilt in 2008!).

There are many similarities between Texas Hold’em poker and investing:

• They are both ultimately solo occupations.

• If you want to invest, trade, or play Texas Hold’em successfully you need to develop a business plan and learn the patience to adhere to this plan.

• When practiced by serious people they are done with the objective of making money.

• There are elements of luck in both fields in the short run but in the long run the skill of the player / investor should be expected to result in financial gain.

• They both require a knowledge of probability and statistics to be able to perform well.

• They both have unavoidable expenses associated with playing – in poker it is the “rake” and the “blinds”, in investing it is commissions.

• It is possible in both fields to learn a great deal about your performance by analysing your wins (good investments), and even more so, your losses.

• They both require the player / investor to cope with risk and also to avoid risk in equal measures.

• Finally, and in many ways most importantly, there is an emphasis on being able to know and control your emotions when playing / investing to ensure that decisions are as rational as possible.

Learning the skills that are required to be a good Texas Hold’em player can help to increase your understanding of how to invest sensibly, profitably, and with low risk levels.