Blue Chip Investor 1D, 2A, 3B

Blue chip investors are willing to pay up for quality. This is the easiest kind of risk-taking, the best type for people who don't like risk. Since you pick based on long-term value, it makes sense to buy and hold. Your primary defense against risk is time. You can have risk in the short run, these stocks are priced for perfection, so even a minor problem can cause the price to fall. But these are the least likely companies to disappear or stay mired in problems forever. They have attracted aggressive, ambitious, talented, loyal people and given them long-term success, those people will rebuild the company if at all possible after disasters that would smash most organizations.

No one will blame you for your losses. You will not feel stupid, because you bought the best. If even that didn't succeed, that's clearly beyond your control. The old saying went "no one got fired for buying IBM," which was true until people did get fired for buying IBM. So things change, but investing in solid value is the easiest defense. Another psychological benefit is that most of your investments, most of the time, will have positive outcomes. You do get the occasional big loss, but most people prefer rare big losses to more frequent small ones of the same total size.

Playing top pairs in poker is similar. These hands play well against any other hand (except a higher pair, of course). You generally stay in until everyone else folds or showdown. That's not always true, but these are still the easiest hands to play. If you do lose, you have a bad beat story. No one will make fun of you for betting big on AA.

It may seem as if there is a difference between buying stocks and playing poker, you don't have to pay more for AA than 72 offsuit. But I disagree. With AA, you could raise big preflop and take a pretty sure profit. You give that up if you play the hand, that is if you let others stay in by betting smaller at the beginning and hoping to build a bigger pot. Moreover, you pay a cost in blinds for every hand you play. You need to make enough on your best hands not only to pay the blinds for them, but for all the weak hands you fold. It's not enough to make a small profit on your high pairs, you need to extract all the value you can.

These hands are the easiest to play. Everyone knows what they are, and you seldom go wrong by betting them. Even misplayed, so you do not maximize value, you'll rarely lose money on them over the course of a session.

Value Investor 1A, 2C, 3C

Everyone wants to be a value investor like Warren Buffett or Michael Price. But it is very difficult. Not finding value investments, that's no harder than finding other kinds of stocks. Successful value investing requires you to buy more when the price goes down, and take profits when the price goes up. This follows since your estimate of value is independent of what other people think. But you cannot ride any single investment down to zero, losing everything you own, so you also need to know when to fold'em.

You are always going against the crowd in value investing, meaning your losses will be labeled "foolish," and your wins "flukes." You will make money when other people are losing it, which is never popular. John Maynard Keynes famously observed that it is better for your reputation to fail conventionally than to succeed unconventionally.

You will always be nervous, doubling up bets that are losing, betting that you're right as more and more people disagree. You'll miss every boom and fad. Your portfolio will be filled with losers, since you sell the winners when their price goes up so they are not longer good value. Your only defense against risk is your skill at managing it.

Similarly, in hold'em, value hands like middle pairs are the hardest to play. Whatever the flop, you'll be faced with hard choices. You'll seldom have nuts, you'll often have the second-best hand. You'll take a lot of small profits and a few big losses. When you do lose, you'll be derided for calling foolishly on the river with a pair of 7's. When you win, you'll be cursed as a lucky idiot.

If you can stand the psychological heat, and have the nerve to keep doubling the stakes against the world's opinion when you think you have a small edge, and the judgment to change your mind eventually when you do turn out to be wrong, and the guts to walk away from a large investment when that happens, and the shrewdness not to be wrong very often; then you can be a successful value investor. Otherwise, stick to easier risks or pay someone else to do your value investing for you.

Growth Investor 1C, 2D, 3A

Growth investing is pretty easy, although not as easy as blue chip buy-and-hold. You make a bet. If it doesn't work out quickly, you cut your losses. If it does, you let your profits run. Your defense against risk is asymmetry. You make a lot when you win and lose only a little when you lose. You do lose a lot more than you win, which bothers some people, but your wins are grand. Your portfolio is filled with winners, since you cut your losers quickly and keep your winners a long time. You have great stories about your prescient genius when you win, and all you need is a short memory to ignore the losses that seem embarrassingly stupid in hindsight. You get relatively quick gratification, compared to the many years it takes to evaluate blue chip and value investing decisions. Your successes are glamorous and consistent with popular opinion.

However, this does take some skill. If you don't have the discipline to sell quickly when the first story doesn't work out, or if you don't have the nerve to ride your winners all the way up, you will not be successful.

In hold'em, you can play your middle suited connectors, but you need the discipline to fold quickly if you don't hit the flop, and the nerve to bet aggressively when you do. These are also the hands used for semi-bluffs, so you need to be alert for these opportunities.

These hands are pretty easy to play. You know which flops are good for you, and which ones aren't. You don't pay much attention to what other people have, either you miss and beat nobody or hit and beat everybody. You can't completely ignore people, someone could have a higher straight or flush, or a full house, but reads are not as important as when you hold two pair without the top pair.

Activist Investor 1B, 2B, 3D

This is the realm of uncalculatable risk. Mathematics and logic won't help you much, the result depends a little on your skill and a lot on unpredictable factors. In the game of bridge, tournament players are required to disclose their bidding systems, so opponents can interpret the bids. There is a semi-joke system called EHAA (pronounced EEE-HAW) for "every hand an adventure," meaning that the players bid whatever they feel like letting their opponents and partner guess what they have. For activist investors, every deal is an adventure.