Investing and Game Theory

Question: What is the best way to start investing using Game Theory if you have limited financial resources?

Lewis Harrison answers:  As in any other domain using game theory to invest involves knowing how to strategize. Game theory is “the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.” Game theory is mainly used in economics, investing, political science, and psychology, as well as logic, computer science, biology and poker.

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Let’s begin by exploring what it means to be an investor. To invest is to allocate money (or sometimes another resource, such as time, space, information or influence) in the expectation of some benefit in the future. In finance, the expected future benefit from investment is called a return (to investment). The return may consist of capital gain and/or investment income, including dividends,  interest, rental income etc. The economic return to an investment is the appropriately discounted value of the future returns to the investment.

Investment generally results in acquiring an asset, also called an investment. If the asset is available at a price worth investing, it is normally expected either to generate income, or to appreciate in value, so that it can be sold at a higher price (or both).

Investors generally expect higher returns from riskier investments. Financial assets range from low-risk, low-return investments, such as high-grade government bonds, to those with higher risk and higher expected commensurate reward, such as emerging markets stock investments.

Investors, particularly novices, are often advised to adopt an investment strategy and diversify their portfolio.

Diversification has the statistical effect of reducing overall risk.

To be an effective investor there are three elements that one must master:

  1. Knowing how to connect the dots accurately: We live in an interdisciplinary world. And the factors that make something a good or bad investment are complex. If you are well read in a wide range of areas you will come up with a more expansive understanding of these factors and ask a wider set of questions. This will lead to better choices as well as solutions to investment problems.
  2. Information and Influence: If your financial resources are limited you can leverage qualities like time, space and information to get you access to game changers, influencers and other “power-players.” The key element in this is getting information and merging it with clear critical thinking skills. You need to be reading the daily newspaper including specific columns. I follow the BBC, Al Jazeera, CNN, Fox News, the NY Times, the Washington Post, and most of all the Economist. I also follow various news feeds such as Quartz and Digg.
  3. Break out of you own Cognitive Biases. Acognitive bias is a mistake in reasoning, evaluating, remembering, or other cognitive process, often occurring as a result of holding onto one’s preferences and beliefs regardless of contrary information. Cognitive biases will effect investment decisions because they relate to memory, reasoning, and decision-making. The more informed you are and the more you network among those with similar beliefs and interests the more cognitive bias is likely to influence your thinking. This means that in order to be an effective investor you must break out of the box and step out of the bubble into new ways of seeing the investing market-place.

 

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Learn more at RealUGuru.com

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Lewis Harrison is a writer, content-rich, motivational speaker, and an entrepreneur specializing in game based thinking, applied game theory and Game Thinking.

Known as the RealUGuru. He is the author of over twenty-two books published in five languages.  Including the business book.

 

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http://www.realuguru.com/products/printed-books/building-your-business-in-the-new-digital-reality/

 

 

 

In addition Lewis is a  seminar leader, futurist, NPR affiliated radio talk show (WIOXRadio.org) host, success and life coach and a best-selling author.

He is the creator of a web site – http://www.RealUGuru.com  that focuses on the application of gamification, decision science, positive psychology, happiness,  and visionary thinking to solve basic, complex and extreme problems. He is the creator of a free course on business success and human potential.

Here is a short interview with Lewis;

https://www.youtube.com/watch?v=zp4DtXpPBeM

His company www.eventschairmassage.com offers Corporate chair massage to meeting planners, event planners, association meetings and trade shows. He also offers these stress management and onsite massage services in NYC, Los Angeles, Las Vegas, Chicago, Dallas, Greensboro, Columbus Ohio and many other cities across the United States through www.NoStressSpeaker.com.

 

 

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About Lewis Harrison

Problem Solver, Author, Speaker, Trainer, Consultant, Peak Performance Coach, and Radio Talk Show Host. Expert on Personal Development, Futurist, Game Theory
This entry was posted in Attitude, Corporate Chair massage, Corporate Stress Management, futurism, Game Theory, How to Solve a Problem?, Influence, Leadership Development, Life Coaching, Mind, motivational speaker, personal power, positive thinking, Power, Power of Positive Thinking, Problem Solving, self help, Solving Problems, Stress Management, success, Uncategorized and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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