A fairly common investing personality I see among my high-tech colleagues is the investor who needs action. While most investors tend to be overly conservative, action junkies need risk to make things interesting. Those who need some risk are likely better off finding some avenue other than investing for finding action.
When the topic comes to investing and I mention buy-and-hold indexing, others often complain that this is too boring for them; they prefer to make big bets on hot stocks. However, when I press for details of their results, invariably their incomes prop up their portfolios rather than the other way around.
How can investors like this save their portfolios from themselves? Maybe one possibility is to find risk elsewhere and keep the investing boring. I don’t think of myself as an action junkie, but I guess I have at least a small risk-seeking streak. I enjoy a few poker games each year. A typical game will see me ahead or behind less than $100. This is much better than betting the farm on a high-tech start-up and losing $100,000.
Unfortunately, there are pitfalls with this approach as well. I know a few people who play far too much poker and play badly enough to lose money consistently. Further, a couple of them take unreasonably big gambles with their investing as well.
So, playing a little poker works for me but not for everyone. I’d be interested in hearing from others who have found an effective outlet for their gambling instinct to keep them away from losing their savings.