The powerful investment lessons you could learn from chess grandmasters

09 February 2024

In a few weeks, eight chess players will gather in Canada to compete in the World Chess Championship 2024 to determine who takes the top rank. The approach the world’s best chess players take could provide some powerful lessons for investors. Read on to discover what you could learn from grandmasters.

1. Set out a clear goal

Competitive chess players have a clear goal when they sit down to play a game – to win. But they’ll often have other aims too. They might plan to force moves, which will allow them to play out tactics or combinations that favour them. By focusing on the end result they want to achieve, they can try to take the necessary steps.

Jose Capablanca, who was world chess champion from 1921 to 1927, once wrote: “In order to improve your game, you must study the end game before everything else. For whereas the endings can be studied and mastered by themselves, the middle game and opening must be studied in relation to the end game.”

Similarly, understanding what your end game is when you’re investing could be useful. Your reason for investing may affect the time frame or which investments are appropriate for you. Starting with the result you want to achieve means you’re in a better position to create a plan that could help you realise your goals.

2. Be prepared but not inflexible

Chess players might approach a game with an idea about which combination they want to play, pieces to sacrifice, or how to gain a strategic advantage. Yet, they can’t predict what their opponent will do. Reviewing the pieces on the board and adapting their play to suit the circumstances is essential.

English chess grandmaster John Nunn reportedly said: “Stay flexible. Be ready to transform your advantages from one type to another.”

You can’t predict how investment markets will perform either. Creating an investment strategy that suits your needs is usually just the first step when effectively managing your portfolio over the long term. Regular reviews may help you assess if you could benefit from making changes, either to ensure your strategy continues to reflect your circumstances or due to external factors.

That doesn’t mean you should update your strategy every time something changes or your portfolio’s performance doesn’t meet your expectations. Like a chess player, review your pieces on the board and understand if they’re still in the right position for your goals.

3. Practise patience

A single game of chess can last for hours as players study the board and try to predict how their opponent will respond. In fact, the longest game of chess took more than 20 hours and still ended in a draw between Ivan Nikolic and Goran Arsovic.

International master chess player, Jeremy Silman is recorded as saying: “When you play chess the idea is to make good moves, not quick ones.”

Achieving the title of grandmaster isn’t a short route either. To secure the title, players will have won hundreds of games and likely spent thousands of hours studying too.

Patience is something investors could learn from chess players. Usually, it’s sensible to invest with a long-term time frame in mind. This could help smooth out the peaks and troughs of the markets. In contrast, if you invest for a short period, there’s a greater risk that you could be affected by short-term market movements.

So, focus on making long-term returns, rather than searching for a quick win.

4. Control your emotions when making decisions

Chess tournaments can be intense, and some players are sure to be nervous when they take a seat at a chess board. However, they must think strategically and focus on what’s in front of them rather than their emotions.

Much like when investing, chess players acting on emotions like excitement or fear could make a move that isn’t right for their plan.

Bias can also affect chess players. A player who’s feeling overconfident might leave their opposition an opening because they fail to review all the possibilities. Similarly, investors can act on bias like overconfidence, such as taking more investment risk than is appropriate for them.

5. Work with a “second”

Many grandmasters will work with a second, who helps them prepare for games by researching openings and opponents. Even the best players in the world recognise they could have weaknesses that may hinder their chances of success.

A second could help identify potential opportunities and risks that a chess player may overlook in a game. A financial planner could take on the same role when you’re making investment decisions.

If you’d like to talk to us about your investment portfolio and how we could support your wider financial plan, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

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