Sunday, March 11, 2018

What Gambling Reminded Me About Investing?

You may be wondering why did I, an investor, decided to discuss about gambling?

This is because I went to Genting recently for 2.5 days and I LOST about $450 in GAMBLING (Yup, I gamble as well, especially when you are in Genting and the theme parks are still in renovation). Although it may not be a lot in your eyes, but this lost was the most in my life when I gamble.

Generally I was a careful gambler. I do not bet a lot in 1 game, unless I was very certain my winning odds were high. Furthermore, in casino, I do not participate in bets being more than RM 50. I cannot withstand the thoughts of losing more BECAUSE I knew the odds were already against me. In my view, 50% of the your winning odds comes from information gathered. The other 50% comes from LUCK.

Therefore, based on the above information, I end up only playing jackpot, pontoon, 12 zodiac sign wheel of fortune (I don't really know the name), and big small.

From my experience and feeling throughout this trip, I actually realize a series of emotions and insights. I was also able to relate these experience and insights to investing. Thus, I decided to share these thoughts in the post below.

1. Casino is always the winner. 

This is especially true when it comes to jackpot. A lot of my losses came from the jackpot machine.

I realise that when you make small bets, the jackpot machine tends to give you small wins to "pull" you in. There will be once at each machine that you will be able win much more than the capital you put in. But it was never enough.

Then as you gain confidence and make bigger bets, the machine still continues to reward you regularly. It will, similarly at a single point of time, give you winnings that is able to cover your capital and maybe slightly much more. But it will not be the jackpot (the big win that you were hoping for). This will only be possible if LUCK was on your side. And believe me, getting the biggest win is possible as I saw people in the casino getting it in front of my eyes.

Investing: Mr Market is will always comes out top.

As retail investors got more gains from Mr Market in 2017, many investors believed they FOUND the magic formula. They are the guru.

But when they are not aware, Mr Market will come back to haunt you.

One of the recent example is the STI falling from about 2.2% on 7 Feb 2018 - the biggest 1 day decline in 2 years.

2. Jackpot vs Big Small

This is a comparison between Jackpot and the Big Small game.

In Jackpot, you can make a lot of small bets in a short span of time, without any extra information to increase your probability. You will continue to make the next bet without considering what you learn from the previous bet. You can only HOPE for a good outcome.

In Big Small game, you have more information to look at. There are ways to increase your probability of winning but looking at past results. From the past results, you gather information and make more informed bets.

Between the 2 games, the amount gain or loss and the time spent, in a single game of big small maybe similar to 10 games in the jackpot.

So why did I chose Jackpot over the Big Small game? If only I realise this earlier!

Investing: Having more information or data reduced your risk significantly.

As an investor, if you read the annual report of the company you intend to purchase or you are vested in, you are already having more information than 80% of the investors.

By having more knowledge about the company, you will be making a more informed decision as well as calculated risk. Although you will still be hoping that your decision is correct. But this time round, you have a higher certainty that your decision will be correct.

3. The feeling of "I am so sick of losing" could result in you making irrational decision.

During the game, there was a game of Big Small where I suddenly felt "sick of losing". Thus, I decided to use all my chips in the next round, making on a few bets - Something that I never did previously.

In the end, I lost all of the bets.

Investing: We must always keep our emotions in check.

When we invest, there will be a lot of noises trying to affect your judgement. Daily price movement will also test your emotions.

As investors, we must believe in our method as well as our initial thoughts of investing in the counter. Unless the fundamentals have changed, we have to consistently keep our emotions in check and try not to allow the noises to affect us.

That's all for this article!

It will be great for me as a reminder if I intend to go Genting again!

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  1. Hi, nice write up! I suggest the baccarat tables, especially when the tables are full and every player on the table bets on a certain side. I think that's the thrill of casinos, placing bets with other humans around rather than playing with a virtual machine

    1. Hi Magpie,

      Regardless which game we play, it will be exciting! Haha...