Splitting 8’s- Your Money and Your Emotions

Tuesday, July 29th, 2008 by Charles Mayfield, CFP®


In a recent ‘boys trip’ to Biloxi for gambling, I had an experience that related directly to the market…and thought it appropriate to share my experience. My hope is that this article will at the very least spark some commentary from you or get you thinking the way Cass and I hope you will.

My game of choice is Blackjack. It’s the game I could play for hours and just keep playing. I never hit a table without two items (not counting money of course): My good luck charm (a Silver Dollar from the year I was born and my cheat card that shows what to do with every possible hand dealt to me). The card always gets a good laugh from the dealer and pit boss. I’d like to focus today’s discussion on that card.

This card has basically established the absolute rules for what to do when dealt any combination of cards versus whatever the dealer’s up card shows. There are several things that you are ALWAYS supposed to do regardless of what the dealer shows. Splitting Aces and splitting 8’s are two of those absolutes. I have no problem splitting my aces…it just feels good knowing that you are going to possibly get 21 twice. However, the emotion behind splitting those 8’s has always just torn my stomach in two…especially against a dealer’s 10 or face card. The idea of doubling my bet against a possible loser just rips me up. This card was developed after running millions of simulations through a super computer. Statistically, over the long haul, I’m going to win more than I lose. Does any of this sound familiar when it comes to the management of your money?

The emotion surrounding one’s money is no different. Here you sit, looking at your 401k online and while watching some TV show about investing. You sit there and want to make an irrational decision about what to do in the face of some bad news (much like that dealer showing a 10 against your 8’s). You want to just take a hit. You don’t want to invest more money in a loser. You want to make the ‘emotionally comfortable’ decision.

Now here comes the fun part. Let’s say that you take that hit on 17 and win. You have just beaten the system…congratulations. But what did you ultimately accomplish? You have just conditioned yourself to make another wrong decision when it may matter most. You sacrificed long term satisfaction for short term gratification. Investment strategy is no different. You develop a plan (much like sticking to the cheat card). The minute you deviate from that strategy, you probably have thrown logic, reason, and the hopes of meeting your long term goals into a tailspin.

Casinos have it figured out. Get people to make irrational decisions when their money is on the line and the casino will win most of the time. They don’t build multi-million dollar hotels in the middle of the desert for nothing. Please remember that emotion drives the majority of our poor decisions. To the contrary, it is rational and calculated planning that brings out most of our incredible decisions. Allow a professional to help you create a game plan that is custom built to your needs….and stick with it. It’s the best defense against poor decision making.

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