9 September 2010
What a great chess players can teach Investors
Posted by selfprofit under: Career; FSBO; Real Estate; Retirement; Taxation .
The constant iterative calculation of risk and reward required in every chess move translates well to the investing world. I thought it might be instructive to look at three chess world champions and see how their style matches up to various investment styles http://geologyonlinecourses.com/geochemistry-degree-programs/. Do you see your own style in any of these Grandmasters?
Tigran PetrosianTigran Petrosian, my favorite player, is widely regarded as the greatest defensive player in history.
Petrosian's style is characterized by risk-aversion and an incredible patience in waiting to exploit any errors by his opponent. He preferred to quietly develop behind closed positions and sought to cramp his rival's development at every opportunity. Board position was so important to him that he often made sacrifices in order to gain positional advantage.
Chess grandmaster Paul Keres once said, "Petrosian was a player who spent more time considering his opponent's possibilities than his own."
So the Petrosian investor thinks about risk, risk, risk. When he looks at a company, he is always focusing on trying to foresee and avoid the negatives while also strengthening the underlying strategic position. This type of investor will tend to miss out on stellar gains but should avoid disastrous blowups.
However, if you are willing to make sacrificial investments in order to suit the overall plan, hedging and diversifying should come naturally, as they help contain overall risk.
One criticism of Petrosian was that his approach tended to make him draw too many games through lack of initiative. Similarly, the Petrosian investor will spend a lot of time looking at situations and avoiding them because of risk-aversion. However, they will wait until the price is right and then move to take advantage.
This game is very ins
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