There can often be a discussion about whether investing and gambling games like poker are similar.
Many will often disassociate the pair and say that they are different.
However, it is impossible to deny that they both share a common aspect: risk.
Risk is a factor that needs to be managed effectively when trying to be successful, with there being a lot of it in all forms of investing and gambling.
Indeed, wherever money is involved, there is always an element of risk that needs to be considered.
There are numerous ways in which it can be managed, though.
Those who play a game of poker on the internet may know that they need to have a good understanding of bankroll management if they want to be able to enjoy more sessions, while those who invest need to understand variance.
With a variety of risk management principles available, many of them can be applied to both poker and investing, thus making these two industries that are perhaps a lot closer than many may have ever wanted to admit or have ever thought.
Bankroll Management
Having already highlighted its importance, bankroll management is arguably the most important way in which risk can be managed in a masterful way.
This technique in terms of poker will usually involve the money that a player has in their pot and can wager with, while in investing it is the amount of money that can be used.
Both require individuals using the money to be risk-aware and ensure they remain on top of what they are doing at all times.
In poker, this would usually mean knowing when to play big or small, or when to fold in order to prolong a playing session.
In investing, this is slightly different, as it usually means in regard to the amount being invested in one particular asset.
Investors will want to diversify their portfolios and have numerous investments in which they can then spread their bankroll.
It can be very risky to do, but it can also be more rewarding than putting an entire bankroll into one stock and potentially losing it all.
Of course, due diligence should be undertaken before any decision is made to eliminate the risk factor as much as possible.
Variance
Variance is another aspect of poker that can also be utilized by the investment sector, thus making the two industries appear to be closer than some acknowledged or understand them to be.
The term variance represents the ideology of random fluctuations that can happen in results that are inevitable.
Poker players experience these often as they will notice that there are some games that are better than others, with experienced pros knowing that they can go through good – and bad – patches for significant periods of time.
Investors will use this term differently, but it still means something similar.
They will note that variance is about the market’s unpredictability.
Investors know and recognize that there can always be external factors and market influences that can instantly change how a stock or an asset performs.
To manage this and the risk associated with it, they will often look at the long-term opportunities as opposed to any short-term gains.
If there is light at the end of the tunnel, then the risk is more manageable to deal with when required.
Discipline
Arguably, the main way to deal with risk and manage it effectively is in regard to discipline.
Being disciplined is a skill that all pro poker players and investors will have, as it is absolutely vital when trying to maximize the amount of success that can be enjoyed and limit any potential damage that may be incurred.
Those who play online poker will know that they need to be disciplined with the moves that they make and have a strategy in place if they are to prolong the length of time their bankroll is able to last.
If they do not, they are likely to lose more often than not, as they continued to make rash moves that did not make sense.
Investors are exactly the same. If they are not disciplined with the moves that they decide to make, then they could miss out on the results that they are trying to achieve.
Also, if they follow the crowd, or do not have the patience to capitalize when the opportunity is right, it could do them more damage than good as the risk can be greater.
Final Thoughts
Risk management is one of the most important skills that any poker player and investor needs to have in their arsenal.
It is what can make them successful at their role and obtain the results desired.
While both worlds may continue to be disassociated from each other, it is clear this is one aspect that is crucial for both, especially when mastered.
