What is the maximum amount I should spend on financial gambling?

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ebaron
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What is the maximum amount I should spend on financial gambling?

Post by ebaron »

I have always had an interest in financial gambling (i.e. gambling using the financial markets, instead of casinos or racetracks). I day trade futures, holding positions for at most 20 seconds. I treat it as exciting entertainment. Is there a general guideline on the maximum percentage of my disposable income I should spend on such entertainment? Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
GoldenFinch
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Re: What is the maximum amount I should spend on financial gambling?

Post by GoldenFinch »

Whatever amount/percent of your money you feel comfortable losing. Most people here say no more than 5% of your portfolio.
heikejohn1
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Re: What is the maximum amount I should spend on financial gambling?

Post by heikejohn1 »

My amount for individual stocks is 5% max
That feels comfortable to me if I loose it all. If it trends up, I'm happy and count it to the pot. That starts a new 5% amount.
When the time is right, I sell and add to the my reg portfolio.

So, my answer is: 5%
aristotelian
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Re: What is the maximum amount I should spend on financial gambling?

Post by aristotelian »

I think the 5% recommendations are mostly for buy and hold individual stocks. I would not days trade with any more money than betting on horse races or lottery tickets. Maybe $200 in a year? I would view it as an expense similar to going to the movies.
Last edited by aristotelian on Mon Oct 12, 2020 4:34 pm, edited 1 time in total.
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PicassoSparks
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Re: What is the maximum amount I should spend on financial gambling?

Post by PicassoSparks »

I think you should consider your financial gambling part of your consumption budget and not account for it in your asset allocation at all. What’s the max you can spend on trips for vacation or going to sports games? Same answer.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Kelrex »

Typically when people are asking for a metric or rule of thumb they're looking for permission to spend more than they would otherwise permit themselves.

Determine exactly what you are willing to lose and be accountable only to yourself. If you cannot do that, start seeking professional help for your gambling.
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Re: What is the maximum amount I should spend on financial gambling?

Post by grettman »

Zero.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Stinky »

PicassoSparks wrote: Mon Oct 12, 2020 6:38 am I think you should consider your financial gambling part of your consumption budget and not account for it in your asset allocation at all. What’s the max you can spend on trips for vacation or going to sports games? Same answer.
I like this answer.

Gambling of any type (casino, race track, sports betting, financial) is a consumption item. Most, if not all, types of gambling have a negative expected outcome; that is, you should expect to lose money over time.

Never, ever bet more than you can afford to comfortably lose.
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whodidntante
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Re: What is the maximum amount I should spend on financial gambling?

Post by whodidntante »

All I can think is --- It's not a serious loss if you still have a car to drive home in.
Gary Carson

My point being that this is a matter of perspective.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Nate79 »

Zero. And go get some help.
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Re: What is the maximum amount I should spend on financial gambling?

Post by arsenalfan »

Agree with whatever you're comfortable seeing go to zero.
And do it in taxable, so you can tax loss harvest.
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Tamarind
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Re: What is the maximum amount I should spend on financial gambling?

Post by Tamarind »

The same amount of money you'd be willing to take out in cash and light on fire for entertainment.
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nisiprius
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Re: What is the maximum amount I should spend on financial gambling?

Post by nisiprius »

You should spend as little as you can stand to, preferably zero.

You agree that gambling is addictive. You describe yourself in a way that suggests you personally are attracted to financial gambling. Your question is exactly like asking how much anyone can safely spend on any addictive thing that has a strong attraction for them.

There are two questions I always ask, and to date nobody advocating "X% fun money" has actually answered them.

1) Can't you get more fun for the same money in some other way?

2) What, exactly, do you do if you lose the money you have allocated to gambling? The usual unstated assumption is that this won't happen. The unstated assumption is that what is at stake is only the psychological humiliation of underperforming the market.

The rationale for setting a limit is that you have limited yourself from doing serious financial harm to yourself. But the only way it can be a limit is if, after a loss, you never gamble again in your life. It does not seem likely to me that any human being who has a gambling urge, and has been feeding their gambling urge, really will do this. It seems far more likely that someone who has lost all of their X% fun money will gamble a second X% stake and try to recoup.

To put it bluntly, I don't believe very many people can stick to a "nonnegotiable fixed percentage limit."
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Re: What is the maximum amount I should spend on financial gambling?

Post by Jack FFR1846 »

Zero.
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9-5 Suited
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Re: What is the maximum amount I should spend on financial gambling?

Post by 9-5 Suited »

Yeah, if gambling is addictive to you, the right amount is $0. If someone said gambling is addictive and asked you how often she should go to the casino, what would you say? I hope you’d say “never, and I recommend seeking help if the urge persists”.

Nisiprius described the practical issue. You’ll always have to keep refilling the gambling bucket once you lose the money. “Oh but I would stop if I lost it all” ... might be tough for something that’s addictive!
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Re: What is the maximum amount I should spend on financial gambling?

Post by SQRT »

nisiprius wrote: Mon Oct 12, 2020 7:36 am You should spend as little as you can stand to, preferably zero.

You agree that gambling is addictive. You describe yourself in a way that suggests you personally are attracted to financial gambling. Your question is exactly like asking how much anyone can safely spend on any addictive thing that has a strong attraction for them.

There are two questions I always ask, and to date nobody advocating "X% fun money" has actually answered them.

1) Can't you get more fun for the same money in some other way?

2) What, exactly, do you do if you lose the money you have allocated to gambling? The usual unstated assumption is that this won't happen. The unstated assumption is that what is at stake is only the psychological humiliation of underperforming the market.

The rationale for setting a limit is that you have limited yourself from doing serious financial harm to yourself. But the only way it can be a limit is if, after a loss, you never gamble again in your life. It does not seem likely to me that any human being who has a gambling urge, and has been feeding their gambling urge, really will do this. It seems far more likely that someone who has lost all of their X% fun money will gamble a second X% stake and try to recoup.

To put it bluntly, I don't believe very many people can stick to a "nonnegotiable fixed percentage limit."
Thanks. A very perceptive and well argued post.
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Re: What is the maximum amount I should spend on financial gambling?

Post by afan »

nisiprius wrote: Mon Oct 12, 2020 7:36 am
the only way it can be a limit is if, after a loss, you never gamble again in your life. It does not seem likely to me that any human being who has a gambling urge, and has been feeding their gambling urge, really will do this. It seems far more likely that someone who has lost all of their X% fun money will gamble a second X% stake and try to recoup.
How much should one budget for buying cigarettes?
Zero.
If you smoke, then the goal is not to limit the amounts you spend on cigarettes. The goal is to stop smoking.

Get help.
Stop gambling.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Valuethinker »

ebaron wrote: Mon Oct 12, 2020 3:53 am I have always had an interest in financial gambling (i.e. gambling using the financial markets, instead of casinos or racetracks). I day trade futures, holding positions for at most 20 seconds. I treat it as exciting entertainment. Is there a general guideline on the maximum percentage of my disposable income I should spend on such entertainment? Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
I can't share the personal details of my indirect experience of this but I know someone whose life has been ruined by his addiction to financial gambling. Or as they call it "investing".

You might not believe this, but the worst thing you could do would be to make a 7 figure sum gambling in this way. I have seen someone do that, and then lost it all.

I have other friends with addiction problems - they credit AA with saving their lives.

If you know something is addictive, why experiment with it? And consider the repercussions of your activities on your loved ones - you think your personality won't change when you are up, or down, but it will.

I would say your budget should be zero. If not zero then a finite number of dollars: 500 or 1000 or whatever.

A percentage of your total wealth would be the worst case. Because, believe me, that percentage will grow.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Valuethinker »

nisiprius wrote: Mon Oct 12, 2020 7:36 am
The rationale for setting a limit is that you have limited yourself from doing serious financial harm to yourself. But the only way it can be a limit is if, after a loss, you never gamble again in your life. It does not seem likely to me that any human being who has a gambling urge, and has been feeding their gambling urge, really will do this. It seems far more likely that someone who has lost all of their X% fun money will gamble a second X% stake and try to recoup.

To put it bluntly, I don't believe very many people can stick to a "nonnegotiable fixed percentage limit."
Everything Nisi wrote in this post is intensely relevant and apposite, in my view.

But I have seen the underlined point in real life100 times. Even (especially) among professional fund managers.
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Re: What is the maximum amount I should spend on financial gambling?

Post by 22twain »

PicassoSparks wrote: Mon Oct 12, 2020 6:38 am I think you should consider your financial gambling part of your consumption budget and not account for it in your asset allocation at all. What’s the max you can spend on trips for vacation or going to sports games? Same answer.
Another example: spending at hobby shows for collecting or other types of hobbies.

Following this model, if I were interested in this sort of thing, I would keep my "gambling stash" separate from my other assets, by using a completely separate investment account, and add a fixed amount per month. If I get lucky one month, then I have more to play with the next month. If I go bust, then I start over from scratch with the next month's contribution.
Last edited by 22twain on Mon Oct 12, 2020 11:30 am, edited 1 time in total.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Mrxyz »

ebaron wrote: Mon Oct 12, 2020 3:53 am I have always had an interest in financial gambling (i.e. gambling using the financial markets, instead of casinos or racetracks). I day trade futures, holding positions for at most 20 seconds. I treat it as exciting entertainment. Is there a general guideline on the maximum percentage of my disposable income I should spend on such entertainment? Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
Zero, should be zero........You already have the answer "Gambling is addictive........." You are looking at the hook right now and wondering if you can bite/swallow it and then be able to spit it out later when xyz happens etc.................it will not work. So it should be zero.
Stay the course, make it boring etc etc.......
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Re: What is the maximum amount I should spend on financial gambling?

Post by catdoctor »

Zero.
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gr7070
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Re: What is the maximum amount I should spend on financial gambling?

Post by gr7070 »

Zero

Find a better hobby. The odds are against you; I don't see a compelling reason to give away expected value for this.

If that money doesn't matter to you give it those that it would.
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Re: What is the maximum amount I should spend on financial gambling?

Post by knowledge »

The problem with gambling is that the excitement requires a significant stake. That means as your net worth grows, your gambling bankroll needs to grow as well - so a fixed % is right. That said, looking back to what I used to stake a decade ago playing in the casino vs. now would require me to up the stakes too dramatically. So luckily, it seems that I've aged out of most of it. There's no "smart" percentage, just try to limit it so it isn't ruinous until you age out of it.
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Gambling in the stock market

Post by Taylor Larimore »

ebaron wrote: Mon Oct 12, 2020 3:53 am I have always had an interest in financial gambling (i.e. gambling using the financial markets, instead of casinos or racetracks). I day trade futures, holding positions for at most 20 seconds. I treat it as exciting entertainment. Is there a general guideline on the maximum percentage of my disposable income I should spend on such entertainment? Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
ebaron:

I was once a collector for the Internal Revenue Service. One of my first assignments was to collect from a taxpayer with a large unpaid tax lien. I assumed he was wealthy.

I drove to his address. It was a long old wooden building with individual rooms for various tenants with a toilet and kitchen on one end. I asked a tenant where I might find my delinquent taxpayer. I was told "he spends most of the time at the Merrill Lynch office."

I then drove to the Merrill Lynch office and asked the manager if he knew my man. He pointed to a poorly dressed man in the front row who was watching the ticker type displayed above a chalk-board.

It was my early lesson about gambling in the stock market.

Best wishes.
Taylor
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Re: What is the maximum amount I should spend on financial gambling?

Post by Broken Man 1999 »

Only what you can lose without endangering your standard of living/retirement.

So far as using a 5% limit, heck no! Way too much to put at risk, for some portfolio balances. Think of this: a 5% portfolio hit could be greater than many retirees withdraw for their yearly expenses, ours included! No way I would put at risk such an amount. :shock:

Find a less expensive passion/addiction/bad habit! I have a couple, but they are cheap to support. :D

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Re: What is the maximum amount I should spend on financial gambling?

Post by Watty »

One thing to realize is that one of the worst things that can happen is that you get lucky and do well when you "play" with a small amount and win big.

The problem is that you are then likely to bet much bigger amounts until you lose big.

This happened a lot to people during the Dot Com bubble and people even did things like take out home loans just to invest the money.
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Re: What is the maximum amount I should spend on financial gambling?

Post by abuss368 »

ebaron wrote: Mon Oct 12, 2020 3:53 am I have always had an interest in financial gambling (i.e. gambling using the financial markets, instead of casinos or racetracks). I day trade futures, holding positions for at most 20 seconds. I treat it as exciting entertainment. Is there a general guideline on the maximum percentage of my disposable income I should spend on such entertainment? Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
I would encourage you to read Jack Bogle’s book “Investment vs. Speculation”.

You will learn much.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Gambling in the stock market

Post by abuss368 »

Taylor Larimore wrote: Mon Oct 12, 2020 10:45 am
ebaron wrote: Mon Oct 12, 2020 3:53 am I have always had an interest in financial gambling (i.e. gambling using the financial markets, instead of casinos or racetracks). I day trade futures, holding positions for at most 20 seconds. I treat it as exciting entertainment. Is there a general guideline on the maximum percentage of my disposable income I should spend on such entertainment? Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
ebaron:

I was once a collector for the Internal Revenue Service. One of my first assignments was to collect from a taxpayer with a large unpaid tax lien. I assumed he was wealthy.

I drove to his address. It was a long old wooden building with individual rooms for various tenants with a toilet and kitchen on one end. I asked a tenant where I might find my delinquent taxpayer. I was told "he spends most of the time at the Merrill Lynch office."

I then drove to the Merrill Lynch office and asked the manager if he knew my man. He pointed to a poorly dressed man in the front row who was watching the ticker type displayed above a chalk-board.

It was my early lesson about gambling in the stock market.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you."
Thank you for sharing that story Taylor. I can not imagine the stress and loss of fortunes from speculation and thinking one can beat the stock markets.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: What is the maximum amount I should spend on financial gambling?

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ebaron wrote: Mon Oct 12, 2020 3:53 am I have always had an interest in financial gambling (i.e. gambling using the financial markets, instead of casinos or racetracks). I day trade futures, holding positions for at most 20 seconds. I treat it as exciting entertainment. Is there a general guideline on the maximum percentage of my disposable income I should spend on such entertainment? Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
You shouldn't spend a dime on this that you cannot afford to lose forever.

I've known people who would walk into a casino with a certain amount of cash and no other form of money or getting more on them. When they lost that money, which they usually did, that was the end of it. Still, I think that for many, that's playing with fire (and not the good FIRE either).
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Re: What is the maximum amount I should spend on financial gambling?

Post by epictetus »

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Re: What is the maximum amount I should spend on financial gambling?

Post by Olemiss540 »

The same percent you would spend/allot on casino gambling. Same thing, different setting.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Doom&Gloom »

Olemiss540 wrote: Tue Oct 13, 2020 6:46 pm The same percent you would spend/allot on casino gambling. Same thing, different setting.
+1

If you don't have an edge, then 0.
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Re: What is the maximum amount I should spend on financial gambling?

Post by 260chrisb »

grettman wrote: Mon Oct 12, 2020 6:43 amZero.
Or even better yet everything you've got! Kind of wonder why you would ask such a question like that on a forum like this in the first place? :confused
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Re: What is the maximum amount I should spend on financial gambling?

Post by JoeRetire »

ebaron wrote: Mon Oct 12, 2020 3:53 amI treat it as exciting entertainment.
How much do you currently spend on non-financial-gambling entertainment each year?

Reduce that amount by however much entertainment you wish to give up and spend that.
Gambling is addictive, so I'm planning to set an nonnegotiable fixed percentage limit.
That's not how addiction works...
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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Re: What is the maximum amount I should spend on financial gambling?

Post by Doctor Rhythm »

You may already know this, but just as a reality check to a new forum member: your post brands you as a real outlier, not just on this site but in general. Plenty of people come here with get rich quick ideas, speculation plans, or a false sense of their financial savvy. They are often motivated by greed or fear, but not by the surge of dopamine in the reward center of their brain. Yours is the first post I’ve seen that raises a red flag about addiction or compulsive behavior. Not saying you are or will become an addict, but your post made me and others suspect it. Please seriously consider the advice to stop trading for excitement or seek professional (medical, not financial) advice.
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