To succeed on Wall Street, you need to know what game you’re playing | Viewpoint

To succeed on Wall Street, you need to know what game you’re playing | Viewpoint


An alien walks into a casino.

His first stop is the poker table. Players are dealt cards and wager chips. A dealer maintains the flow of play. Some players win, others lose. The alien struggles with the rules.The alien then ambles to the blackjack table. Similar players, similar dealers, the same 52 cards, and the same multi-colored chips. How is this any different than poker!? I traveled 50,000 lightyears for this?!

The alien, understandably, is a bit confused.

Put yourself in the alien’s shoes. Think of how many unique games can be played with a deck of cards. (The International Playing-Card Society estimates there are over 1,000 unique card games with a standard 52-card deck.) Each game’s strategy, of course, is dependent upon its rules and goals. Folding kings is crazy in Texas Hold ‘Em poker, but discarding two kings makes sense in Gin Rummy. The same action can be genius or folly depending on the context.

Most average investors bear similarity to the alien, and Wall Street is their “casino.”Stocks, bonds, and alternatives take the place of cards, chips, and dice. These assets are bundled into mutual funds and “funds of funds” like Matryoshka dolls. Television “experts” shout about puts and calls and double-levered naked spreads. Naked spreads?! Easy, slugger. The alien’s at a casino, not the Moulin Rouge.

Thousands of assets, strategies, and games. But most investors fail to ask themselves, “What game am I playing? And why?” Is it poker, blackjack, or one of a thousand other variations? What tactics (or assets) make sense in your particular game? Are you in it for the long haul or to make a quick buck?

Enveloped in the intoxicating vapors of Wall Street, too many investors mimic the games they see others playing. They pour money into popular investments — alien see, alien do — despite decades of research concluding that’s precisely the wrong behavior to follow. Your smartest strategy is a function of you and your life — not of what the crowd is doing.

Other investors go to extremes. They take on too much risk or avoid risk altogether. Going “all in,” or not at all. How much risk is right? It depends, of course, on the game you’re playing and the goals in your life.

Why don’t more investors understand their “smartest strategy?” Why don’t they know their reason for investing in the first place?

It’s because there are no lines on Wall Street. You see — the lines are clearly drawn at the casino. Poker is here, blackjack there, slots are in the corner. Similar games, sure, but clearly demarcated. No confusion about it (unless you’re an alien).

Not so on Wall Street. There are no clear lines. The market is wide open to any participant looking to make a deal. We’re all trading the same financial instruments on the same markets, all at the same time. It’s as if every game at the casino played off the same deck of cards or the same pair of dice. Confusion and chaos would ensue.

Wall Street is that chaos. We have one shared market for conservative retirees and TikTok Robin Hood gamblers alike. We’re all playing together.

Roughly 60 million shares of Apple trade every day. Some are going into 401(k)s and index funds, but others are wagered in risky options contracts. Same pieces, different games.

Half the market thinks today’s $164-per-share is a smart price to buy Apple. The other half thinks it’s a smart price to sell. Same players, different opinions.

Some of us are in it for the long haul. Others are making daily bets. Same players, different timelines.

When Jim Cramer (no relation, and potentially an alien) is hollering on TV, is he shouting about your game? Probably not! But it’s too easy to feel familiarity (“I own stocks. This must be for me.”) and assume Jim’s advice applies to you.

Know your game, learn your strategy, and stick to it. Ignore the others playing their games. Most of them are aliens, still struggling with the rules.