| I use stops to ensure that a small loss doesn't become a big, devastating loss - and that a nice win doesn't become a loser. At the poker table this weekend, the gentleman to my right lost all his chips. He pulled out a wad of cash an inch thick and peeled off another hundred in order to buy more chips. I saw him repeat that several times. I never - and I mean never - do that. In fact, I don't even bring enough cash to go back into my pocket in case I'm tempted. Before I get in the car, I make a rational decision (before emotions take over) about the maximum I'm willing to risk. And that's what I start with. If I lose it all, I won't lose any more than I was comfortable risking. That's what a stop will do for you in investing. Poker is also a lesson in position sizing. The Oxford Club recommends that you never put more than 4% of your portfolio into any one position. That way, if you suffer a 25% loss on the stock, which is where we traditionally set our stops, you've only lost 1% of your entire portfolio, which is easy to bounce back from. The poker world is full of stories of brilliant players who go bust because they've mismanaged their money. They take too much risk with too much money, and when things go badly, it becomes a catastrophe. I've worked way too hard in my life to let any one investment take me down. I assume you have too. Making and losing money is often an emotional experience. Make decisions about stops and position sizing before you put any money at risk. Your outcomes will be better, and when things do sometimes go against you, it won't be as traumatic - financially or emotionally. And if I see you at the tables, trust me, I have the cards. 😉 Good investing, Marc (Editor's Note: I've actually seen Marc's poker prowess firsthand. A few years ago, he and I joined several of our Oxford Club colleagues for a highly anticipated poker game. I'd only played a handful of times... so you can imagine my excitement when I won a few hands off of Marc early in the game. I said to myself, "I thought this was supposed to be hard!" But by the end of the game, I was long gone... and Marc was the last man standing. It turns out patience and discipline do pay off (and, as he wrote above, not just in card games). For more on what I learned from that Oxford Club poker game, click here. And for more from Marc on what a poker champion nicknamed "The Poker Brat" can teach us about investing, click here.) | 
Tidak ada komentar:
Posting Komentar