Sunday, January 26, 2014

Approach MTGO Finance like Warren Buffet

If you have been living under a rock, you may never have heard of the most successful investor in the world: Mr Warren Buffet, 83 years old right now.

Here's how happy investing money makes him.
This guy has managed to get 20% a year on any money he has invested - over a long period of time. In the world of investing money, he has no match.

Based on a long article in the Swedish financial magazine Aktiespararen, I have tried to figure out how mr Buffet would approach MTGO Finance.

Here are some of his principles and how they may apply to Magic Online:
  • Evaluate the company, not the market:  Think about the deck the card you are evaluating goes into. How will this deck do in the future? What will the demand be? Can the card be reprinted?
  • Choose the right company and act as an owner: If you invest in cards, make sure you have played them. Be aware of the interactions of the card so you can properly evaluate if a card is overshadowed by a newer card. If you deep on a card, make sure you play it. Constantly.
  • Think about the difference between a card's price and its value: Rageblood Shaman spiked on MTGO as it has a lot of value if a Minotaur deck becomes a viable (even tier 3) Standard strategy. The card has a lot of potential value but had a very low price. If you managed to sell in time, you could have earned 1000% on the first spike (5 to 50 cents) .There may be future spikes.
  • Buy cheap and keep for a long time: This may apply more to stock that actually on the average have positive expected value (EV). Magic cards do not. BUT overall MTGO speculators are too shortsighted. Act on the major trends - such as PTQ season and not fancy guesses about the future. (Check out my Seasonal Trading video - link below).
  • Trade as little as possible: Warren wants to avoid fees and you should also act to avoid fees! Do not give the bots 15-50% every time. Sell to humans. Get your own bot from mtgolibrary (you only pay when you sell!). You can trade a lot if you do not lose rake every time you do. Be aware of fees.
  • Invest deeply in a few companies: Specialize. Choose a format or a set and learn everything about it. Do not try to speculate in all MTGO cards. Avoid more complicated areas like foils or promo cards until you are ready. We have all tried to speculate in too many areas. Consider how many speculators are trying to break Standard prices - maybe you should be the one that ignores the current set?
  • Never borrow money for investments: If you borrow money to invest in MTGO cards, you are adding even more risk to a market that already has huge risk. Do not do it. I do not think there are many speculators that do this but if you even think about it - DON'T!
  • Act rationally, not emotionally: Be aware of yourself and your emotions. You are your own worst enemy. Do you have pet cards? Are you attached to an investment and can't sell it to cut your losses? Learn about yourself. Know yourself.
  • Be aware of interest on interest: There is probably a situation where you can get interest on interest on MTGO but I fail to think of one right now.
  • Learn from your mistakes: When you have to sell with a loss think about why this happened. What could have turned out differently? Why didn't it? Did you make the right call and then something bad happened (like a sudden reprint, for example) ? How can you avoid this situation in the future?
  • Take your own path: MTGO finance is different because most of the people on the market are players, not investors. Even so is it really your best option to check Reddit and Twitter and do what Marcel does? Or can you find your own niche?

Thinking like this made Warren Buffet the fourth richest man in the world:

He was beaten only by three guys who built worldwide companies. It is hard to approach MTGO Finance like Bill Gates, btw.

Some of my other MTGO Finance material:

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