It may be one of the most popular casino games among amateur and seasoned gamblers… It’s not too complicated. You don’t need a PhD in mathematics to calculate your winnings. And there are a few basic principles to help you limit your risks and maximize your potential returns.
Blackjack – whether played with two, six, or eight decks of cards… the game is quite simple.
To tell you the truth, I’m not sure, despite the many books written on blackjack or the numerous strategies players share around the table, that one can win consistently… unless that “one” is the casino. Nevertheless, there is a little lesson I think we can learn from the blackjack table.
Perhaps you’ve heard of a hot or cold shoe? It’s when a dealer keeps busting and the players win or the dealer just can’t seem to lose. Either way… there’s a trend. And when there’s a trend at the table, the seasoned players take notice and change their strategies… betting more or less dependent on the trend.
OK… so this is a weak parallel… which shows my gambling ignorance I’m sure (once again). But, play along…
Hot or cold… up or down… recognize there is a trend in the markets and that momentum is very difficult to fight. Yes, there’s always a winner in the midst… but when the overall market momentum is going in a particular direction with conviction, it is difficult to swim against the tide and come out ahead. The same can be true for individual stocks. That’s why I review and highlight everyday the “Market Momentum” as I see it for that day (see the top right side of this website).
So, before you jump in or jump out of your next investment, take time to review the overall Market Momentum and then review the trend of the stock. If it’s crashing… don’t chase it down… please. If it’s already taken off and left you behind, please be cautious about diving in to chase it. And if it is gaining strength and growing in revenue sales as well as trending upward, do it… go with the trend… and may you make money on the markets every morning.
In yesterday’s article, I highlighted the importance of knowing a little about investing before throwing your money into the markets in the morning. Today is a continuation, of sorts, on this theme.
Did you know some of the games at the Casino have what’s referred to as a “rake” (see this article)? Win or lose, they take a little of your money every hand you play. Did you also know brokerages also have a sort of “rake?” Every transaction you make, buy or sell, comes at a cost. It’s the fee you pay to the brokerage whether or not you “win” or “lose.”
But, what if I told you that although the game doesn’t change from casino to casino… and the trades don’t change from brokerage to brokerage, one will rake you over the coals by charging you a $29.95 fee versus the competitor brokerage fee of $4.95 for the same trade? Umm… yep… exactly… Now of course, one brokerage has slight differences from the others… and you’ll have to determine if it’s worth the $25 surcharge. After all, I’ve had some inexcusable service from the cheaper brokerage. Nevertheless, at the end of the day, learn this little lesson from the casino…
Don’t get Raked over the Coals… Know your Broker(age)
The “Keep your Cash Series” from several months ago touched on this lesson… but in light of the importance of this topic, I wanted to highlight it in this article. I hope this helps you in your investment plans.
Friends… week one (lessons 1-4) of this series is done, with the next 4 to come next week. Please take a moment to share your thoughts with the community of investors that share this site. We learn from one another… and many of you have lots to contribute! So, join in! Next week, we’re going to look at three specific casino games and the lessons we can learn about investing through them….
How many of you have entered a casino with cash in your pocket… let’s say $200… and then it happens… It starts to go downhill… a bad shoe, a poor roll of the dice, an “unlucky” dealer. But you know, even if no one else believes you, that you’re just around the corner from that big win! So, you dip in a little more…
Part of investing is knowing your own personality and temptations. In an upcoming series, I’ll be discussing the importance of developing an investment plan… but for now, let me just suggest, you need to know yourself.
And you need to remember this little lesson from the casino…
Walk out a Winner by Putting Cash in your Pocket!
Friends… It’s not about how much money you pull out and put on the table, it’s about how much you put in your pocket by the end. Small wins, avoiding losses… be sure you walk out a winner. Put the cash in your pocket along the way and be sure, when the dips come, not to pull the cash back out again. Walk out a winner!
Hey… I’ve got a great idea… give me some money and see what I can do for you. You can take the risk, finance your home, lend me money to invest on your behalf for which you will pay me a fee and for which I take no risk. Sound crazy? Sounds like a real gamble to me!
I once went to a FREE investment seminar with a renowned Canadian investment advisor in which he suggested the following to mortgage free attendees:
- Take out a mortgage on your home (approximately 9% for a 5 year fixed at that time)
- Invest it with the “sponsoring” investment firm – how convenient for them (oh, and they only charge a small fee for investing your money for you on top of the money they are paid by the mutual fund companies, etc.)
- Tell your friends and family to do the same… again, how nice for the sponsoring investment firm
- For those of you with a mortgage, use the equity you have, not matter how small… extend yourself to make profits!
Imagine… you decide in the Spring of 2008 to follow this wonderful advice. And, let’s just say, your investment advisor somehow limited your losses to 25% that year… which is criminal in and of itself that they don’t use stop losses more regularly.
Doom… gloom… fear tactics…
That’s not my intention. But, please, heed this simple lesson from this gambling mentality. If an investment advisor tells you to go into debt to invest with him/her, run fast, run far, run friend, run….
Avoid debt to create investment equity