3 Reasons Why Investing Should Be FunBy Carlo Rossi
- October 1, 2018
- Posted by: Trendlab Academy
- Category: Knowledge
3 Reasons Why Investing Should Be Fun
Games can be fun. That is why they become our hobbies. We like the challenge that comes with them. However, imagine you are sitting in front of a chessboard. You don’t know anything about chess. Somebody orders you to play. Would you enjoy it?
We usually enjoy playing games only if we know the rules (how to play) and the strategies to play well (how to win). The better we become, the more we enjoy them.
Investing has all the components that make games fun. However, for people to enjoy it, it should be approached like a game; that is, you have to learn the rules of the game and the strategies to win it. Like for any game, if you don’t know how to play it, you can’t enjoy it.
In fact, you should enjoy it even more because investing has 3 features that make it even better:
- Games are zero-sum; Investing is positive-sum. When you play a game with your opponent, either you win or the other party wins. You can’t both win. That is what we call zero-sum. Your win is the other party’s loss and viceversa. On the other hand, investing (and in particular, its Beta component) is positive-sum, which means that, in aggregate, many people can win. In fact, theoretically everybody could win, if they were good at it. That is very important because losing is not a pleasant experience. I might enjoy playing chess or tennis, but I imagine that playing with Kasparov or Federer would not be an enjoyable experience (unless I play chess with Federer and tennis with Kasparov J). Entering a game where enjoyment and success depends only on you and not on somebody else’s loss is a much better proposition.
- Games are confrontational; Investing is not. When you play a game you are confronting an opponent that is usually in front of you. This confrontation is not particularly pleasing (at least not to me). When I was at the university my friends and I occasionally played a board game called Risk. I loved the game but I also remember many quarrels that came out of it because of its confrontational aspect. After all, you had to decide who to attack and we tended to take it personally. Investing is a competition (a positive-sum one) against the rest of the world. But when you buy or sell, you don’t know who the person selling or buying from you is. It’s not confrontational and hence much more pleasant.
- Games don’t have real life consequences; Investing does. If you put a lot of effort in becoming a good amateur chess or tennis player, you might feel some satisfaction from your achievement but ultimately you might ask yourself “Is it worth spending all this time for something that doesn’t have a real impact on my life”? At least for me, this is the question that led me to stop playing golf. I enjoyed it a lot but it also consumed a lot of my mental energies and I felt that it was not worth it. I personally prefer something that has real life consequences so as I get better, I start to see tangible results. In my opinion, it’s a better proposition.
There is one final difference between investing and other games: other games are optional; investing is not. You can decide whether you want play a game or not. It’s your choice. Unfortunately, if you have some money, you don’t have this choice in investing. The moment you accumulate some wealth, you are automatically thrown in the game of investing, whether you like it or not and whether you are aware of it or not. The only way out is to spend all your money. Leaving money in the bank is not a way out because it’s still a strategy with its own set of returns and risks.
And remember that inflation doesn’t allow you to sit idling either. If your returns are positive but below inflation, your wealth is decreasing because you are losing purchasing power.