Learn To Invest By Studying Gamblers

Depending on where you’re from, gambling is either the most fun thing ever, or a horrible taboo. In either case, there’s a lot of misinformation around the activity.

I love gambling and used to play tons of poker and backgammon, as well as making various sports bets.

While I haven’t bet on anything in years, there are many gambling lessons that have carried over from cards and football into finance. And here are three concepts that can help make you a better investor.

Make Smart(er) Decisions By Applying Expectation Value

Expectation value is the mathematical formula for determining how much money you’ll make our lose from a particular action. In gambling, casino games all have a negative expectation value.

The house always wins.

Other games, like poker or Chess, have positive expectation values — if you know what you’re doing.

With investing, there’s a common fallacy where people pile into a falling stock, under the assumption they’re getting in at a great price.

3M Company is a good example of this, with a lot of investment articles and videos highlighting the stock’s historically low price and high dividend yield.