Foremost in the list of rules, in ‘Red Joker Rules: The 35 Rules of Gambling That All Investors Should Know' by Pat Holland ( www.landmarkonthenet.com ), is ‘Start early.' The gambler who arrives at the racecourse in a flustered state just as the horses are cantering down for the fifth race on the card is not going to win much, advises the author.

Reminding that investing is a lifetime thing, he urges you not to dither. “At best, if you are young (and, in our long-lived society, anything up to 60 is at least a little young) put some money into a solid long-term self-parlaying product such as an index tracker or an exchange- traded fund.” Acknowledging that stock market is a volatile place, Holland reasons that the long-term maths indicates that a carefully chosen bundle will up at a steady 10 per cent per year; and that puts it far ahead of inflation, and the difference grows all the time.

Another rule in the book counsels you to gamble your early winnings, to enjoy the mathematical advantage implicit in the game. The author notes that the study of any successful gambler will reveal that they continued to reinvest their winnings as they went along. Conceding that, when the stock market is rising, there is a great temptation to cash in – and there can be situations where you should – Holland observes that any early gains from cashing in will look paltry a few years later. He also cautions that you may get into trouble by developing looser spending habits or overconfidence in your new investments.

Study your opponents

A rule that can remind you of ‘Art of War' is ‘Study your opponents,' drawn from the world of poker. “Even the greatest of poker players have a tell. A tell is an apparently trivial pattern of behaviour that alerts other players, if they are perceptive enough, to whether or not they are bluffing. Of course, those poker players who fall short of greatness have so many tells that the professional poker players can tell what they are holding entirely by their body language.”

In the market, everyone out there is your opponent, alerts Holland. For, everyone out there is either trying to take your stake by selling you something above its value or charging commission on selling it. So, how do you observe them? If shares, or property, have risen rapidly in value, either as single units or collectively, you must ask yourself whether the rise is justified by the facts, the author instructs. If it is, buy as soon as possible, he adds. “Similarly, if a fall in value has no convincing cause, it is time to buy. It is not what your opponent is doing that matters. It is whether your observation of him bears out that his reactions are in line with reality, or not.”

Fun read with an immense educative value for investors.

Related Topics
comment COMMENT NOW