I was watching an exciting episode of Millionaire this morning (Ogi/Meridith) and realized that this game has elements in common with investing (psychology & decisions). The other game that came to mind is Deal or No Deal. I started to ponder which is most like investing.
The main difference between Millionaire and Deal is knowledge. The right knowledge is critical to Millionaire while knowledge is essentially irrelevant to Deal. What they have in common is large sums of money, decision making, and uncertainty, risk, and reward.
Investing is somewhere in-between. Knowledge is helpful, but not THAT helpful.
Millionaire is progressive and often abrupt. Deal is a volatile up and down ride.
Emotionally I think Deal is easier. I’d have less fear of making a fool of myself on Deal. However, if i missed a question I should know on Millionaire I’d fear that it would haunt me long after the show.
Maybe my initial query is not the most interesting part of this discussion. Each show is a way to see a wide range of human behavior compressed into an entertaining package. Literally millions of such financial decisions, quandaries, and sometimes struggles happen on a daily basis without such TV coverage. Most of us make such decisions at least a few times a year. That is perhaps why so many of us can relate to game shows. They can be a window into the more dramatic aspects of money.
Yesterday I myself was in the hot seat. I heard about BAC and BCS (Bank of America and Barclays ADR) yields given their precipitous drop. A classic value play. I decided to buy some right away with my “play money” account. But I didn’t get to it Tues. I bought today, but not after they were up 15% and 6% respectively in less than a day.
Q: Did I feel foolish? A: Not really.
Q: Did I feel anything? A: Yes, right… but a touch slow Laughing
Q: Am I right? A: Yes, until proven wrong.
So a little bit of Millionaire (possible knowledge about value) and a bit of Deal (do I feel lucky?). And emotion. It was exhilarating to buy stock after a one year hiatus. Sure I’ve been writing covered calls against index ETFs, but that is not the same rush as getting into new stocks. It felt good. Such emotion, ideally, would not enter into my decision making and response. Generally I have less emotional reaction to re-balancing my primary portfolio. It should be careful and generally boring and infrequent work. My play money account is an outlet into which to channel my more impulsive financial energies and help keep my primary money-management decisions calm, deliberate, and sober.
I haven’t really answered my initial question. I have, however, had a fun romp into an investing tangent. Perhaps soon I will stroll into gambling and investing (poker vs. craps). I hope you had fun going on this short journey. I did. Until next time, dear intrepid reader.