The masked battery
From the publishers of THE HINDU
Monopoly has been a classic board game for over 100 years. It’s a real estate trading game that nearly everyone plays for fun and a chance to be a pretend real estate tycoon. But if you’ve played Monopoly long enough, you quickly realize that the game offers a lot of financial wisdom and lessons that can be applied to the real world of finance and investing. Below are five valuable lessons that not only help you increase your chances of winning the board game, but also increase your chances of having a better and useful understanding of prudent financial and investment principles.
By far, this is perhaps the most important lesson in the both the game and the financial world. To win in Monopoly you have to the be last player left, in other words, the last one to have money. So if you aimlessly move around the Monopoly board buying up everything in sight, when the time comes to pay your financial obligations, you are likely to run out of cash. No cash means you have to start selling off the properties (assets) you acquired at a deep discount to what you paid for them. In the game, you are allowed to mortgage them at a discount to face value. Once this process happens, unless you get lucky, it’s only a matter of time before you go bankrupt.
The same exact principle applies in real-world financial matters. The United States got a front row seat to the consequences that occurred during the recession when cash is not available. When the Great Recession hit, people had been spending cash like crazy, thanks to an addiction to credit. Yet when the housing market went bust and the U.S. banking crisis erupted, those without cash were decimated. The Monopoly effect took place: without cash, folks had to “sell-off” what they owned at steep discounts. Unable to make mortgage payments, people were forced to sell their houses for significantly less than what they paid for them, or worse, the lender foreclosed on the property. Any equity was wiped out.
The same consequences were suffered in the stock market to a staggering degree. When the credit markets seized, many investors scrambled to raise cash. The only option they had was to sell securities at any price. This need for cash created an avalanche of selling that created the huge market decline in 2008 and ultimately led to good, hardworking people losing most, if not all, of their investable assets. On the other hand, the people who had cash were given an opportunity to buy assets – stocks, real estate, bonds – for fractions of what they were worth and, in the end, they won the game and made the most money.
To win at Monopoly you have to be patient and have a game plan. You just can’t win by buying every piece of real estate you land on; you have to have a general approach of how you want to proceed. If you are impatient and start buying every piece on the board you land on, you will quickly find yourself out of money and, thus, unable to do anything but hope for the best. Therefore, you have to be patient and know when to buy and when to take a pass.
Similarly, if you just buy without discipline when investing, you will be placing your outcome on the hope that the market behaves nicely. Successful investors don’t invest based on hope, they invest with a disciplined approach. Patience is a very integral part of that approach.
During the Internet boom of the late 1990s Warren Buffett was ridiculed for not investing in Internet companies while speculators around him were capturing triple-digit gains. A lucky few got in and out at just the right time; however, for the vast majority, the result was painful losses. Buffett exercised patience for years while everyone else was chasing Internet stocks. In the end when the market and investors ran out of money, the bottom came crashing quickly, wiping out the majority of investors who weren’t patient and disciplined enough.
Monopoly is a simple game: you start off with some money and your goal is to be the last player standing with money. The way you win in Monopoly is by collecting rents on property, or cash flow. Not many people know this, but the most valuable properties on the Monopoly board, with the best cash flow, are the four railroads; if you can own all four of them, you have put yourself in a very good position. With each railroad costing $200, by owning all four you collect $200 in rent or a 25% return. I realize this may be a very bizarre way to look at a game, but this is precisely why Monopoly offers some valuable financial and investing lessons.
Over time, assets increase in value based the cash flows they produce. Even something as simple as a savings account or savings bond becomes more valuable if it earning more cash, i.e., a higher interest rate. In investing, the most successful investments come from those companies that can generate growing cash flows. Iconic companies like Coca-Cola, Johnson & Johnson and IBM have been highly successful investments for decades because of the growth in cash flows.
Most monopoly players want to own Park Place and Boardwalk since they have the biggest payouts. But they are also the most expensive pieces to maintain. Many people lose at Monopoly by owning the most expensive pieces because they don’t pay attention to cost, only cash flow. Focusing on the cash flow without taking into account the cost paid to attain those cash flows is to play the game with blinders on.
Those who win at Monopoly, and investing in the long run, instead focus on the value gained for price paid. In investing, the best investments can often be tarnished companies trading at a bargain price. Owning Boardwalk and Park Place is not how you win at Monopoly; you win by making the most money. In investing you win by buying low and selling high. When you focus on the most expensive assets, odds are you are overpaying and setting yourself up for losses.
You won’t win much in Monopoly by just owning one property on the board and loading it up with hotels. It’s also hard to win if you try and buy everything on the board and spread yourself too thin. Occasionally you can get lucky and have every opponent land on your property, but usually the winner is someone who spreads out his or her properties throughout the board and has multiple chances at capturing rents.
The same principle applies in investing. If you bet everything on one or two stocks, you are exposing yourself to a potential wipe out if something goes wrong. At the same time, you can dilute your gains by trying to own 100 different stocks. Diversify intelligently – studies have shown that a portfolio gains no additional diversification benefits after 15 to 20 securities. So don’t just bet on one or two assets or try and keep up with 50 assets.
Of course, a board game like Monopoly shouldn’t be taken as a thorough education in finance and investing, as it certainly has it’s flaws. However, it does have some valuable lessons to teach, such as to spread yourself out across the board intelligently, keep cash on hand, focus on cash flows, be patient and pay attention to price. Use these five lessons as a guide post to more intelligent and successful investment decisions.
This is -literally- the coolest one of all: a USB mini fridge for your drinks. Plug this USB LED Beverage Cooler ($29.99)to yourand chill a can on your own . One of the coolest USB accesories out there, the LED Beverage Cooler is retro styled and has a small inside. The LED helps your drink stay cool by tricking it to think the air inside the cooler is from the Arctic, because everyone knows that blue lights make you feel cold. So add a little style to your desk and keep your drink cold at the same time. Chill, dude.
The workplace has become a dangerous place. Sonic grenades, catapults, lightsabers, ninjas… you need protection, and not just any. Defend your office with this awesome USB Missile Launcher ($32.49) and fire those missiles right from your desk. The Missile Launcher moves Left, Right, Up and Down, has got pre-recorded sound effects and shoots more than 10 feet at an extremely fast rate.
It sounds like the ultimate male fantasy – a Pole Dancer on your desk everyday In fact, it should be included as part of the standard workplace agreement, but well, it’s finally within your grasp – so to speak. The USB Pole Dancer ($67.99) is the pole dancer you can admit to when everyone’s watching. Just plug her into your USB port and start typing. As you type, she performs. The lights flash, the music plays and your bikini-clad blonde performs her routine. And there’s no need to go tucking dollars anywhere (we read somewhere, they do that): the faster you type, the faster this cheeky minx dances.
Messy desk? Well, this tiny retro-designed USB Desk Vacuum ($13.49) can’t help with the big stuff, but it can definitely help keep your workstation crumb-free! Just plug it into a free USB port and vacuum up those crumbs… and yes, the mini-vacuum handle tilts back, just like the real one. Cool, as in “clean.”
This USB($74.95) allows you to capture some incredibly high quality images and video (up to 200X) and display them on your PC using a simple USB connection. View specimens collected around the house, backyard, your desk, or the fridge. Look at the micro-printing on a dollar bill or examine the traces on your motherboard. This microscope provides you an easy way to zoom in on a wide variety of objects to satisfy your curiosity of the world around you. Ever wondered what lint looks like or the mold growing on your week-old bagels? Now you can find out.
The aviators out there can now keep cool during their flight simulator sessions in front of the computer, using this USB Airplane Fan ($17.95). Cool man, cool!
Fans of thecan now light up their workspace using the weapon of a Jedi: the Star Wars Lightsaber USB Lamp ($26.24). The lightsabre is 13 inches tall, and yes, it can be removed from its dock to be used as your weapon of choice.
Just the word plasma makes you think of going boldly where no-one has gone before. However, the beauty of this awesome USB Plasma Ball ($10.95) is that you don’t have to wrestle Klingons in the outer regions of the Thark Quadrant to play with it; just plug this neat gizmo into your USB port, and streams of red and blue plasma light will flicker out from the core of the hand-blown glass sphere throwing mesmerising light trails across its surface. Touch the sphere with your fingers, and blue light will shoot out towards your fingertips.
Its that part of the dark side which has always beckoned to you in your dreams. Just to make your life the living nightmare that it really is, you could get this Darth Vader USB 4-port Hub ($59.99) and either continue with the torment even in your waking hours or simply give in and admit that you belong to that part of the force.
This unique USB Portable Roll Up($107.99) allows you to track your moves on the board. You can play against a friend or the computer and even use it as a portable . The included software allows you to record, save and replay your games. Simply tap the board with your chess piece to signify a move and the software will keep track.