If it feels like I’ve been writing a little less lately, you’re not wrong. There are a few perfectly normal reasons. First, I just returned from a nice beach vacation where I very intentionally unplugged. And second, like many people after the much-anticipated release of Diablo IV in June I’ve been playing more than my share of video games.

With the benefit of that needed vacation away from the computer and both email and games alike, I realized this might be a good opportunity to write an article exploring the overlap of investing and gaming mindsets. There are certainly a lot of parallels in my own thought processes, and I imagine many of you may relate.

When discussing two passions of mine at the same time, there’s a lot to cover! But to get started, allow me to introduce a few of my top personal characters from my three favorite game franchises over the years.

In terms of genre, each game is a little different. Diablo is the ultimate dungeon crawler, Borderlands is a witty first-person shooter, and Guild Wars is a classic MMO. But if you know anything about how they all work, you may also notice a common theme. When you look under the hood at the underlying game mechanics, they’re all different spins on role playing games, or RPGs.

For those unfamiliar with the term, a defining characteristic of RPGs is a heavy emphasis not only on gameplay but also on build strategy. Rather than providing a game mostly based on personal skill alone like Madden, Mario, or Battlefront, in a RPG your class, attribute, and skill choices all have a profound impact on how your character fundamentally works. There’s a ton of strategy involved in creating the perfect character, and without the right build even the most talented gamers don’t last very long.

Read that last paragraph again, and then think about how it was written on an investing blog by a guy who studies portfolio theory extensively. Not only can you probably recognize the appeal of those games to me, but you’ll also start to understand the crossover in mindsets. Strategy, build theory, optimization — in both RPGs and portfolio research, the planning is a big part of the appeal.

So with both gaming and investing at the top of my mind right now, let’s take some time to talk about investing concepts in terms that a fellow gamer can appreciate. If that’s you, I imagine this should hit close to home and help explain some of the unique challenges you face thinking about investing. And even if you’re not a big fan of video games, stick with me and maybe you’ll learn something new simply from hearing about investing concepts in different terms.

Creating your ideal portfolio build

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In order to understand the parallel between portfolio and character designs, it’s necessary to think in terms of builds. A character build in a RPG is the full design for every allocated skill and attribute, and depending on the game it can range from a simple distribution of a few points here and there to wildly complicated maps. But generally speaking, it all starts with two things: your character class and skill allotment.

Picking your class

At the core of any good RPG is a robust character personalization system. Usually that starts before you even take your first step in the game, as the opening requirement is for you to choose your class. No matter the game, they usually follow a certain fantasy structure with several common themes like a tanky warrior who can absorb a lot of damage or a more fragile but deadly wizard who can dish out big numbers of their own. The choice is up to you. As just one example, here’s the selection in Diablo IV.

Even with the goal of defeating the exact same game, they all have completely different skills and playstyles. If you’re the type of person who likes to run up to a big boss and just start hacking away, the barbarian or druid are your best options. For tactical ranged damage, sorcerer or rogue are likely more up your alley. And for minion builds where you prefer to let your pets do all the hard work, necromancer is the way to go.

In investing, you see a lot of the same variation in classes even if investors don’t always recognize it themselves. It’s all about investing personality type. Lots of professional investors see themselves as nimble rogues who can dance around investing targets while dodging all damage and make a killing with ease. Many old-school stock index investors act like tanky barbarians and talk about just ignoring the pain and staying the course when times get tough. And there are even necromancer mindsets such as dividend investors who take joy in watching each carefully-curated stock dish out regular dividend payments while culling old stocks and acquiring new ones when necessary.

Importantly, picking your class requires enough experience to understand what you do and don’t like. And that experience can only come with playtime. In gaming, that’s as simple as creating a few different characters to see what you enjoy most. But investing is a little trickier when your real money is on the line.

So when you’re new to investing and don’t fully know your class, take your time and start small. Maybe don’t pour huge time and money into something you don’t fully understand even if other people love it. It could be that you have very different investing personality types and that’s ok. Your young years are the best time to try new things to see what resonates. Maybe buy a few shares of a stock you like to learn how trading works, or invest in a simple stock and bond index fund to dip your toes in the asset allocation waters. Save the deep portfolio development for once you’re confident that you’re on the right path.

Planning your skills

Once you’ve identified your class, the next step is to choose your skills. Each game is also a little different, but the basic system usually boils down to some combination of chosen skills and/or skill points.

On the simpler end, here’s an example of one of the Borderlands 3 skill trees.

Each skill point tweaks the behavior of your character in some way, from increasing fire rate to adding entirely new mechanics like a drone that follows you around and drops grenades. But skill points are a limited resource, and you can’t select every possible skill. That’s where the strategy comes in.

A much more complicated example is the paragon board in Diablo IV. Here’s just a small portion of the board for my level 96 rogue.

In this case, there are hundreds of paragon points available to distribute over thousands of options. And it’s not as simple as just simply picking your favorite modifiers, so there are entire strategies around combining boards and finding the optimum path to key nodes.

While it may look a little simpler than Diablo IV on the surface, the skill system in the original Guild Wars still stands out to me as the most uniquely robust and flexible that I’ve ever seen. Here’s a snapshot of my most effective hero build.

Guild Wars has 1329 possible skills across 10 different classes. Each character can choose 2 classes and allocate 8 skills from the pool. The game requires a full team of 8 characters at higher levels, and this is the skill selection for my entire setup including all 7 of my automated hero companions. So just in the skill selections, there are countless numbers of possible team builds. And that’s before you even get into attribute point allocation and gear for every character!

Is your head spinning yet?

Now imagine each of those skill icons is an ETF and each hero character is an account.

There’s a good reason that portfolio theory can feel overwhelming for new investors, and it has nothing to do with their education or intelligence. Investing is just a complicated game at times, and it takes practice to fully internalize all of the rules, possibilities, synergies, limitations, and everything else that goes into good asset management.

If that sounds a bit discouraging, cut yourself some slack. Think about how games introduce you to complexity. The classic example is the OG of video games — Super Mario Brothers.

This image shows the very first part of level 1-1. It’s brilliantly designed to teach you how to play without reading any instructions, and even a child can figure it out in a few minutes through trial and error. Jump to hit block — fun. Mushroom in block — good. Walking mushroom — bad. Jump on walking mushroom — good. You get the idea.

Now portfolio design definitely has more in common with Guild Wars than with Super Mario Brothers in terms of learning style, but it’s still very manageable. Complicated skill allocations don’t appear all at once and they develop with accumulated experience along the entire course of the game. When you first start out, there are only a small handful of core skills to choose from. And only when you level up do you even get to try the more complicated ideas. The education is built into the game.

So the good news is that just like creating a build in Borderlands, Diablo, or Guild Wars, you’re fully capable of building your own portfolio. Just take your time, start small, and add a little more every time you level up and understand something new. Eventually you may reach a point where you make another investor’s head spin, but it won’t feel that difficult to you anymore. As long as you’re thoughtful at each step, becoming a better investor over time is built into the game.

Advanced build theory

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Now that we’ve covered the basics of how builds work, the true strategic opportunities in both character builds and investing portfolios are found in some of the more advanced game mechanics.

Armor and resistance

One of the more in-the-weeds mechanics in some of my favorite RPGs like Diablo and Grim Dawn is the distinction between armor and resistance. Whenever you feel way too squishy in a certain area despite your armor investment and are wondering how on earth people are supposed to survive, there’s a good chance your resistances are off. The distinction is the in the approach to damage mitigation.

Armor is generally pretty straightforward. The higher the numbers, the tougher you are. And characters like barbarians usually start with a bonus to armor relative to other classes like sorcerers, which is why the former usually serves as the tank in the group keeping enemies occupied while the latter stays on the perimeter and lays down heavy-damage spells.

The problem arises in the fact that not all enemy damage is the same. Some enemies deal fire damage while others may deal lightning, ice, or chaos damage, and if you’re not prepared then your armor may not be enough to handle a specific damage type. That’s where resistances come in. The trick to staying alive in games like Diablo IV is not simply to maximize your armor but to also maximize all of your different elemental resistances to be prepared for any situation.

In investing, the same concept applies to dealing with the damage of painful markets. When times get tough, armor-focused investors will often lecture on how huge losses are inevitable and that it’s important to buck up and stay the course. But wise investors who understand how to build resistance to specific economic conditions know that there’s more to the story.

Whether it’s inflation, deflation, or recession, there are several different situations that can cause your portfolio to struggle. You sometimes even experience more than one simultaneously. But there are also certain assets that are especially suited to thrive in those economic conditions, such as long term bonds that take off during deflation and things like short term bonds that are surprisingly good during high inflation. By adding those resistance assets to your portfolio you can drastically decrease the pain that you experience.

Don’t just act tough. The game gets a lot easier when you’re smart and build a portfolio resistant to any economic condition.

The problem with min-maxing

Min-maxing in video games is the strategy of maximizing your favorite character attribute at the expense of all others. A classic example is the idea of a glass cannon player who can put out huge damage numbers but is also very easy to kill because they have no defense. It’s usually pretty fun and it’s always exciting to see big numbers on your screen, but min-maxing also has its downsides. In prolonged fights, you’re more of a liability than an asset. And dying all the time gets old.

I’ve found that eager young investors are especially susceptible to the min-maxing mindset. Only invest in stocks with the highest expected returns! Any cash at all is a drag on your portfolio! Use leverage for even higher returns! Many will argue that taking big risks is just how investing works and that if you keep losing everything then you just need to “get good” and become the investing equivalent of a pro gamer.

Bro — Put down the Playstation controller. Let’s get real.

Even though I recognize that I’m really working the gaming metaphor, please take a moment to consider that investing your life savings is more serious than a video game. But sticking with the theme, it’s most similar to the Diablo Hardcore mode where there are no respawns and you only have one life.

When you min-max your portfolio chasing the biggest possible returns, it can be really exciting and you may feel like a god right up until The Butcher from your brokerage’s risk management team appears out of nowhere, issues a margin call, and leaves you staring at your screen in disbelief and contemplating the reality that you’ve lost everything and must create a new character from scratch. You won’t always see it coming, and no amount of skill may be enough to save you.

When looking for your investments to last not for a single entertaining evening but for a lifetime, balance and preparation is the name of the game. So don’t get cute with ignoring defensive stats. The best long-term returns come not to the portfolios that generate the highest theoretical numbers but to portfolios that actually survive the toughest fights.

Thinking beyond the meta

In RPGs, the “meta” refers to the most popular builds that the vast majority of people are using at any given time. Maybe that’s a whirlwind barbarian in Diablo IV or a splinter-barrage ritualist/ranger in Guild Wars that both dish out big damage to entire mobs. The parallel in investing are the handful of portfolio ideas like the Three-Fund Portfolio that are so common that entire communities of people follow them religiously. Following the meta may indeed be a solid plan, but there are also lots of great alternative builds out there for independent thinkers.

My favorite example in games is my current Diablo IV rogue built around thorns damage. Thorns is a niche mechanic that damages an enemy every time they attack you, and if you search for Diablo IV thorns ideas you’ll inevitably be led to a meta barbarian thorns build. After all, barbarians can handle being hacked repeatedly by enemies and also have a few class-specific thorns-related aspects and glyphs. But thorns rogue? You’re crazy. Everyone knows that rogues are too squishy to willingly stand there and take lots of hits.

Well, have you ever tried pairing Razorplate armor (with big thorns damage) with the Penitent Greaves and the rogue-specific Skyhunter bow? What if I told you that Skyhunter’s guaranteed-crit bonus on every first-strike also works on thorns, and that the chill effect on the Penitent Greaves can be used to massively increase the thorns damage without attacking enemies and negating the Skyhunter bonus?

Any one of those three items are indeed just okay in isolation, but combined they allow you to walk into a Torment-level crowd and watch entire mobs one-shot-kill themselves even without you using a single offensive skill. Here’s a clip I just shot to show off the end result.

You feel pretty tanky when most enemies only get one chance to kill you before deleting themselves. In fact, it’s so brutally effective that it honestly makes the game boring. And it’s only doable by:

1. Ignoring the current meta and testing things on your own with hard evidence and not just standard theorycrafting.

2. Focusing on how things work together rather than thinking about individual items in isolation.

In investing, a great example of this same phenomenon is how three portfolio ingredients — small cap value, long term bonds, and gold — work together to generate surprisingly desirable outcomes. That type of unusual portfolio is definitely NOT the investing meta, and plenty has been written on the downsides of each asset in isolation. But once you look beyond common knowledge and study how these assets work together, entire new investing possibilities arise.

So when thinking about your portfolio options, sure, learn about the meta portfolios that everyone else is running. There’s often a lot of wisdom in the popular, battle-tested options. But don’t let that stop you from taking the time to explore interesting new asset synergies for yourself. The meta only changes when smart trailblazers are willing to think differently.

Life lessons in gaming and investing

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From build strategy to game mechanics and unique asset interactions, I really do think that games and investing have a lot in common. And once smart, strategy-oriented people understand the space, there are so many opportunities for exploration that it’s easy to get excited about the possibilities. Games are massively popular for a reason, and the same mindsets can translate into a certain amount of irrational exuberance with your financial choices as well.

So I wouldn’t be doing the subject justice unless I talked about one more important parallel.

Investing is a grind.

Like farming for materials or simply running the same familiar areas over and over again to gain experience points to level up, investing can be boring sometimes. Even with the best build you can muster, sometimes it just takes time to achieve your goals. I think one of the most important lessons that someone can learn is to be okay with that.

If you push your luck in higher tiers to speed-level or desperately chase treasure goblins while ignoring the dangers they lead you into, you drastically increase your chance of death. Likewise, if you utilize advanced trading schemes you don’t even fully understand or chase unicorn returns regardless of the risks, you drastically increase your chance of losing everything. There are no shortcuts in investing.

Also, one of my toxic traits in games is my tendency to focus so much on perfect build optimization that I bankrupt myself gambling on ideal item stats on the loot treadmill or constantly churning skill points that can only be changed at a cost. Think about my rogue build seemingly custom-made for easy gold farming and ask yourself how I might ever be so short on gold that I can’t afford to respec for a while. Yeah, it’s a problem.

Luckily that same character flaw doesn’t carry over into my portfolio choices, but I totally understand how investing optimizers get sucked into the same problem. Whether it’s from taxes, trading fees, or selling low to switch out of a disappointing strategy, every time you touch your investments it comes at a cost. So at some point you have to just stick with the plan and let it ride.

And finally, a really important point that it took me a long time to understand is that some optimization problems are unsolvable because the game always changes. You can spend weeks finding the perfect build in Guild Wars to speed-clear a certain area only to discover that the next area over has entirely new challenges that you haven’t accounted for. And that’s even before you get into the issue of the developers occasionally rebalancing everything and nerfing your build entirely.

So when the economic environment shifts or a regulatory agency changes the rules, don’t be surprised when your “perfect” portfolio suddenly feels less than ideal. The world is a dynamic place rather than a fixed problem to solve, and you have to accept that it will always be that way.

Just like portfolio theory, video games are obviously a passion of mine. But whether it’s the grind, the cost of change, or the impossible goal of eternal perfection, both hobbies can be really difficult if you approach them with the wrong mindset. But the good news is that with a healthy laid-back strategy they can also make life that much more enjoyable.

Portfolio Charts is my effort to document the best builds that the asset allocation world has to offer. So take some time to explore the portfolios, and hopefully you’ll find one that makes your personal adventure that much more fun. For advanced investors, also check out the many customizable charts that are my financial versions of online video game tools like the Diablo4.life or Lootlemon build planners. Just a few minutes of modeling can make your portfolio build ideas come to life so much easier than exploring your raw brokerage tools.

And whenever the grind starts to wear you down — which I guarantee it will — take a break. Go on screen-less vacation and press pause on your research. The game will be there when you return, and your portfolio will also do its thing without you. And when you’re ready to fully engage, think about the joys of simpler times dodging mushrooms and turtles with friends and siblings rather than obsessing over the absolute perfect build.

Life is about so much more than stressing over markets. No matter how you choose to invest, put yourself in a position to enjoy the game.

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What is your favorite game or portfolio build?

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