Chess grandmasters have developed a large database of the best opening moves. Playing white, your first move gives you a choice of 16 pawn moves and 4 knight moves, for a total of 20 possible first moves. And after that first move, each player can choose from hundreds of possible moves. With this many possibilities of making an opening move and following through with the best countermove, chess gets complicated very quickly.
Chess Openings and Investment Lessons
When my chess coach, Boris, first taught me how to do the Sicilian opening, I thought it would be easy… after all, it’s a popular opening. But I quickly discovered that I couldn’t make a move without getting into trouble.
Chess openings can teach us something invaluable about investing. Even when you make the right move, there is no guarantee that following traditional strategies will always work in your favor.
A Little Knowledge Is a Dangerous Thing
I once met a client who knew quite a bit about how investments worked, but not how to invest. He knew about low-cost funds, but not about how to pick them. He knew about bonds, but not about the difference between long and short-term ones. And he knew about all the advantages of long-term stock investing, but not about risk tolerance.
In other words, if investments were like a game of chess, he knew how to move the first few pieces, but did not know what to do once he got out of the opening section of the game.
Chess openings can teach us important lessons in investing. Even the best intentions, a proper opening, can only get you so far. Chess players and investors must have an overriding strategy and be flexible enough to change their tactics mid-game if met with a challenge.
What was your biggest challenge as an investor, and what did you do to meet it?