It's time for poker players to start putting their money to work.

[Scorpion Man]

I am in my late 30s and retired from the hedge fund business. Went to top schools, MBA, etc.

Ok, that was fun to brag.

Now the meat of the post. I know eventually I am going to get bored (wife won't let me play poker all the time)...but I find the poker world interesting (and I think related to skills necessarily for stock selection). I have been trying to come up with unmet needs in the poker community that could be attacked from a business standpoint. I don't have to work, but I like to pursue interesting ventures. One thing that strikes me from reading these boards, in general, is that many of the folks here have amassed cash earnings that outstrip their investment acument (which puts them in good company with most people in the US). I am wondering if there is an opportunity to focus on the investment needs of this niche.

My guess is the main problem is that, for all the success of the professional poker players, there are not that many who have real bankrolls that are investable (say, at least $100k). But I might be wrong. I am confident that these people would be well served by having their investment program directed by experienced professionals...and the key is to avoid the usual (1) b.s. weasel wire tips which are the blind leading the blind and (2) the usual weasel brokers (i am not a broker) who would be selling cars if not selling stocks and don't know what they are doing.

Any thoughts? I have relatives who play poker professionally and I direct their portfolios...I know that it has made a significant difference for them and I assume the situation is similar for others. In addition it would be an opportunity to get educated about portfolio management so that folks could ultimately have a more participatory role in the management of their money.

I think I am unusual in that I have managed billions but am now a degenerate lurker on these boards. Maybe I can combine the two.

[The Young Gun]

Scoprion I would assume liquidity is a huge factor for most professional players. The swings online are massive in the shorthanded games.

[good2cu]

The problem is that will all the time it would take to learn to invest wisly it would be -EV as the time could better be spent playing poker. Most pros my age has no way to measure a professionals skill and intentions so even going with a professional may not be the best idea. (I have read Lair's poker and am leary of brokers).

[Scorpion Man]

Yeah, I realize the age thing. It's precisely why I posted in the first place. Youth is good for many things, but perspective and forethought are not top of that list.

Good2CU...your response about "negative EV" is way way way way off. I made more money with my investing skills last year than you did with your poker skills...I promise. I am not saying you could have done that, because it takes capital to accomplish that. But almost all of the rich people in the world made it through starting a company or investing...not playing poker. Your view of what "rich" is will also change as you get older. People do not realize that a couple million bucks is not "retiring money" when you get older, particularly if you live in a metro area.

I think of pro poker players a bit like pro athletes, but with smaller bank rolls. You are good at something. You earn more than many of your peers young because of it. You have no family and whatever you are making seems like all the money in the world.

You have to understand that long term, understanding investing is CRUCIAL and highly positive EV. I am sure Degen understands this because his posts are intelligent and demonstrate this longer term perspective. Many people blow their hard earned money because they don't understand investing. So, there is really a dual path here...at the least, find someone you can trust to steward your money so that it is wisely invested over time. This avoids the problem I see often (not poker specific) of people who get misled by idiot brokers and piss away their hard earned money.

As a side benefit, you will start to be curious about money and ask questions...and it is key to have someone who is good to answer those questions. ETrade can't do that for you. 80% or more of brokers can't do that for you (and won't be interested in you because you are young and haven't amassed significant assets yet)...

Investing is how to make money without being on the hourly clock. It's also interesting to many people.

The one thing that I find poker players do not understand is that, while they are making good money....in the the long run the vast vast vast majority of them are not going to be making the really big money. They have a lack of respect for what it takes to make 10 figures a year, not 6 or 7. They have a lack of understanding that there is a whole other level out there of financial success, and that they might learn something from those people.

Sadly, I assume most people on these boards will make bad financial decisions with their earnings...buy expensive cars and other depreciating assets, for example. The reason I thought to post here was that I see a parallel to pro athletes, and poker players could use "coaches" -- both for investing and also for spending decisions. The guys who have maturity will understand that this is the path to long term prosperity and will wake up when they are 30 with big bankrolls and portfolios.

I hope to get more replies to this...I know for sure that people need it. My interest in making money was always rooted in a search for security, not a quest to accumulate material things. Investing is a core competence necessary to creating a secure financial future.

[Newt_Buggs]

Can you do significant better for me than broad index funds? If so I'm willing to listen, but I like Degen's idea of having at least some of the information public on this forum.

[ QUOTE ]
Sadly it makes sense, for people making $500-$1000 an hour or more playing poker, time is better well spent doing that than learning to invest.

[/ QUOTE ]
I'm not sure if I entirely agree with you and good2cu here. If you're saving a significant portion of the big paydays then squeezing out an extra percentage or two now will result in an enormous increase in returns throught your entire life. I agree that doing active trading doesn't make much sense, but if we could find a better passive form of investment or a capable individual to invest the money it would be well worth our while.

[Scorpion Man]

No one can promise to outperform broad index funds (or anything else for that matter). I was in the business of creating returns for over a decade. My tax returns from 1994 to 2005 showed material gains in my personal portfolio each and every year (including the disaster stock market years of 2000-2002). My professional record showed gains in 9 of the 10 years in which I had a measured portfolio (the down year was -2%).

I hesitate to write that, because my intention in posting here was not to say "boy, am I good" (although I am, wink).

My intention is to say i am 1000% better than what most people on these boards are doing...which is either nothing, or acting on tips from friends if they are buying individual stocks. I am not a broker...I couldn't take money directly from people if I wanted to - I am not licensed.

But investing is an entire discussion...for some people matching the indexes is a good outcome...for others, they are interested in outperformance, which can only come from individual stock or sector selection. Then you are talking about getting in bed with someone whom you respect and taking the increased risk of stock selection.

As an example of what you can do with small amounts of money that are invested in a concentrated fashion...my parents had a little account with $20k in it that I directed starting in 2001. The market is barely up in that time and they have $75k.

This is not a short "how to" discussion. It is specific to each person's goals, earnings power, asset base, liquidity needs, family situation, risk tolerance, etc.

For most of the people in this forum, the first step is to develop a relationship with someone who will keep them out of trouble, as well as begin to direct them to other possibilites, including individual security selection.

I guess my question is this -- is there enough of a base of poker players out there that one could create a boutique financial practice catering to their particular needs and questions -- combo of tax planning, investing, and given their age (if they are smart enough to listen) -- advice on overall spending and financial management.

I don't know what makes people credible in these forums...I passed on an opportunity to run a fund that would have been news enough to be reported in the Wall Street Journal. I know what I am talking about.

[Kovner]

OK - we get it: you are the [censored] and we need to start investing.
What now? My plan was to read the advice of this forum and invest in index funds so that I don't have to do too much work. Are you suggesting that is a bad idea?
You say not to go to a broker but that we need to talk to someone who knows what they are doing. How do we do that?
You can obviously offer some valuable advice, so please, stop being vague.

[Scorpion Man]

I will give a little advice, but you have to understand that your questin is like asking -- How do I play jacks in no limit hold'em? Please answer in 5 sentences or less...as you know, its much more nuanced and situation specific than that.

I am talking about developing lifetime habits of saving and investing, as well as developing a lifetime relationship with a financial advisor (something that most people desperately need and few do).

That said, in response to your specific question...investing in index funds is much better than buying individual stocks for an investing novice. During most environments it is hard to go really wrong this way. You are rarely going to make big returns (e.g. 40%+), but the same can be said of big mistakes.

The key caveat is that every 15-50 years we end up in an environment where even indexing is dangerous. The year 2000 was an obvious case...many people began indexing to the Nasdaq during this period and lost 80% in short order. I cannot tell you in an internet post how to identify when you are in an environment with the potential to inflict this kind of damage. My current opinion is that we are not in that kind of environment today.