Poker and Investing

[cmmcnjd]

I have been playing online poker for about two years now without any kind of specific overall financial objective in mind. With no intention of ever playing for a living and no immediate need to use the money I am able to win, I typically just let it build and then move up a level as appropriate. The other day it occurred to me that I'm pretty comfortable where I'm at (100 and 200 NL) and that I have no grander aspirations. I then got to thinking about my winnings as extra income and what I've always done with extra income in the past is invest.

Say I'm able to clear $200 a week (which I think is entirely feasible given my results thus far). Invested monthly in a tax-deferred account at a 9% rate of return (historical average of a balanced portfolio) my winnings would total approximately $1.4 million after 30 years. Make it 40 years (age 65) and the total reaches $3.7 million. This nice little chunk of change would be on top of retirement savings amassed through my actual occupation. Realizing that I can put even modest winnings to such highly productive use now makes my time spent playing feel worthwhile in addition to fun. Are there others out there who are making similar use of their poker earnings?

[Freakin]

I think you overestimate your ability to play poker willingly for the next 40 years. Also, it is important to discount the 1.4 or 3.7M for the effects of inflation, a historical rate of 3% going back to 1925. That will better allow you to see what you're actually looking at (and I'd use a lower interest rate for my portfolio, since you're looking at this for retirement income, not shorter term investments). I'm going to be getting married in a year or so, so I've been looking at the bankroll for kid's college education, and paying off the principle on my home, rather than long term investment.

At any rate, I think that having the discipline to invest $200 a week is a huge benefit to your 65 year old self. We are living in a day where corporate pensions don't exist, and 401(k)s are grossly insufficient for most individuals. The average person needs to be saving between 10-20% of their annual income to maintain their standard of living in retirement, and poker winnings are a perfect place for the extra cash.

For all of us young poker players, keep this in mind (if you haven't seen it already).
Given two people investing in a Roth IRA, one who starts at age 20, and stops at age 30. The other one who starts at age 30, and stops at retirement age (65ish). The person who starts at age 30 will NEVER catch up to the one who starts early. So all of you 20ish poker players out there looking to blow your money on penny-whistles and moonpies (and drugs and hookers), think about using it for somethign useful. I sound like my dad..... thats depressing....

Freakin

[david050173]

In addition to it being unlikely that you will play for 40 years, you also have to remember to take your taxes out so you are going to be investing a ~1/3 less money than you expect. That being said consistant investment will lead to a pretty decent retirement fund if kept up for 20 years.

[cmmcnjd]

I use "cleared" to mean after-tax win rate. And I don't view the prospect of playing poker for many, many years as significantly more improbable than doing all the other things I will do for many, many years (work, pay bills, etc.)

[cmmcnjd]

Lower rate? If anything I would use a higher rate. 9% historical average is based on a portfolio weighted 60-40 stocks to bonds. Someone at my age should have a portfolio closer to 90-10 at least for the first couple of decades.

[snowbank]

"Lower rate? If anything I would use a higher rate."

haha. O man. He's talking about the inflation rate. That means the value of money drops in a sense. Money today is worth more than money tomorrow. I would suggest you find a future value of money chart to try your calculations again. A million dollars 40 years from now is really not that much.

[A Dolt]

I have started doing this also. I have found it to be a little boost to my game by making me a more serious player since now I don't just play to have extra cash, but something to help build my future.

And I get a few extra points in with the wife when I say this is for our retirement. /images/graemlins/grin.gif

[MicroBob]

[ QUOTE ]
So all of you 20ish poker players out there looking to blow your money on penny-whistles and moonpies (and drugs and hookers), think about using it for somethign useful

[/ QUOTE ]


Is this implying that drugs and hookers are NOT useful??


Sorry. Couldn't resist.


Interesting thread though.