The Rake

The rake at a poker table is the percent that the house takes, regardless of who wins the pot. The same is true of investing, with brokers and other agents that facilitate the buying and selling of stocks getting a cut of each trade. Like the rake, this cuts away at the player’s profits, but since, like bad beats at the poker table, it can’t be avoided, it must be limited as much as possible. Since brokers make the most if you’re constantly buying and selling, it’s hard for them to stay impartial regarding your trading decisions. They will be full of advice, trying to incite action and drive up their commission. Like playing a lot of hands will deplete your stack at the poker table, constantly splashing around in different stocks makes it tough to be consistently profitable. Rather, playing only solid performers is the way to go, holding on to them until they reach their full potential that we saw in them when we first bought them.