How to Build a Diversified Portfolio When Investing Your Poker Profit

April 16, 2020

When your win rate is growing, you might need to consider diversifying your investment portfolio.

I mean poker is a game with killer variance. Even with the risk tolerance you’ve built over the past years. Are you willing to bet your entire bankroll on the cards you’ re dealt?

No matter how many mental coaches you’ve worked with, every player’s mind is biased. And according to Warren Buffet, diversification is protection against ignorance.

So the question is, are you ignorant or not?

What is risk management?

When it comes to investing your poker profit, risk management is, simply put, an analysis of uncertainties and potential losses in investing decisions and conducting certain actions to prevent those losses.

In the finance world, risk management is always present, and it shouldn’t be considered as something entirely negative. You see, in the investment world, the risk is inseparably tied to returns, and it can be your best friend or an enemy.

As a poker player, you have your fair share of experience with risk management. Simply by playing poker hands, dealing with bankroll management, implied odds, and understanding variance.

As an investment example, higher-risk investments also mean higher returns in the long run, while lower-risk investments usually pay lower returns.

Kind of like playing a high variance whale, which can yield you great results. But he can also hit and run you after he doubles up. While playing a nitty reg of which you can steal the blinds endlessly, it will have much lower variance but also lower returns.

Speaking of that…

What are low-risk investments?

As their name says, low-risk investments carry a small or even minimum amount of risk with them, but, at the same time, the return is likely to be very low as well. Also, you should keep in mind that inflation can affect money stored in low-risk investments.

However, this type of investment is perfectly suitable for beginners in the investing world. So, here are some of the best low-risk investment you should explore:

  • High-yield savings accounts
  • Preferred stocks
  • Savings bonds
  • Dividend-paying stocks
  • Certificates of deposit
  • Money market funds
  • Corporate bonds
  • Treasury bills, notes, bonds and TIPS

What are the high-risk investments?

With high-risk investments, you can get a high rate of return in a short time, but the risk is quite high. However, this doesn’t stop people to diversify their portfolio with this type of investment.

Still, certain investments won’t make you a millionaire, but they can still get you a big profit in a short period.

Here are some of them you can consider and see whether or not you want to risk:

  • The rule of 72
  • Investing in options
  • Venture capital
  • Real estate investment trusts
  • High Yield bonds
  • Trading with fiat currencies and cryptocurrencies
  • Hedge funds
  • Angel investing

Which opportunities to diversify your portfolio are in the middle?

So, you want to have big or at least some amount of returns without putting your money in the high-risk investments? I get that. It’s a perfect solution with an even better outcome.

But, does that even exist? Yes, it does. You can have a decent return on your money, without losing your principal. Here are a couple of suggestions for you:

  • Utility stocks
  • Fixed annuities
  • Brokered CDs
  • Bond and Income Mutual Funds and Unit Investment Trusts
  • Convertible bonds
  • Low volatility small-cap stocks

How to diversify your portfolio?

Photo by who?du!nelson on Unsplash

Unfortunately, there is no straightforward answer to this question. But luckily, there is a lot of options to diversify your portfolio. And to establish a reliable and profitable investment strategy, you should put all your hard-earned poker profits into one basket.

Diversify it. Explore various options such as the above mentioned high-risk and low-risk investments. And those ones in the middle.

Keep an eye on commissions, consider index and bond funds, and pick investments with different rates of returns.

And a couple of final advice. First, you should realize when it’s time to get out. When the time to cut your losses comes, sell and move on to your next investment.

Lastly, keep diversifying and building your portfolio.

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