1. Gamblers are used to balancing risk and reward calculations.
Buying and selling stock in a public corporation puts your money on the line.
Money spent on stocks, like any bet on the blackjack table or a spin on the slot machine, is subject to random variables.
In any case, both gamblers and investors must make two key decisions: how much money to risk and where to risk it.
- Should you spend $100 on the Megabucks slot machine in the hopes of winning a large jackpot, or should you put same money down at the blackjack table in the hopes of double your money?
- Should you put your $1,000 trading account into long-shot “rags to riches” stocks like GameStop, or should you put it into a reliable but slow-growing stock like Amazon.
The settings in the two fields may be vastly different. However, as you can see, both gamblers and investors are well-versed in risk and return calculations.
2. Gamblers think of money as a tool.
Those who have a natural separation from the worth of a dollar are the most successful investors. That isn’t to imply that the Warren Buffets of the world don’t care about making money; on the contrary, it is their life’s passion to make a fortune one trade at a time.
The best investors, on the other hand, will not blink while parting with large sums of money on the road to riches. They understand instinctively that the money in their portfolio is really a resource to be used wisely.
After all, the funds used to purchase stock could have been better spent on a new living room set or a luxury vacation. And in some circumstances, the money spent yields a measurable result, but investments can be made and lost without yielding any results.
Of course, every competent gambler has at least one mantra: “Scared money doesn’t make money.”
3. Gamblers are well-versed in the concept of long-term value.
For the vast majority of the millions of visitors who visit Las Vegas each year, a weekend spent inside a casino is their only chance to beat the house. And, with such a short runway, a sample size of only a few hundred bets doesn’t leave much space for random volatility.
The greatest players can only realize the probability rewards of their clever moves by repeatedly pressing their skill edge. This is referred to as “playing for the long run” in the gambling community, and winning players understand that a large sample size is required to smooth out random variance’s inherent bumps and bruises.
When it comes to stock market investing, the same phenomenon occurs. Consider the stock Evolution Gaming Group as an example.
In other words, a long-term thinker who recognized the value of live dealer exclusivity could have transformed $5,000 into a three-bedroom suburban home.
4. Gamblers aren’t afraid to lose a small amount of money before winning big.
Nobody enjoys losing, and this is true for both gamblers and investors. Regardless of whether you’re playing baccarat or investing in stocks, you’re bound to lose money at some point.
Many investors make a hasty retreat and sell off far too early when their chosen equities start to drop because they want to see substantial returns on their money right away. The stock, predictably, recovers over the next few days, weeks, or months. There’s that long-term mindset again… The frightened seller then realizes they’ve made a mistake.
Consider how a blackjack card counter approaches the game with the goal of eventually beating it. When the deck count isn’t in their favor, they can lose hand after hand at first. They recoup their losses and begin stacking gains by dialing down their bets at that point, discovering a favorable deck count, and betting big to take advantage of the chance.
5. Gamblers understand how to hedge their bets and walk away when the situation calls for it.
While many novice investors struggle to cut hook on a faltering company, skilled gamblers have no issue walking away from a losing bet.
When it becomes evident that an investment strategy isn’t working, taking a loss and selling out can frequently be a better long-term strategy.