Like millions of other Elden Ring fans, I’ve been spending many hours recently killing everything in sight in the new Shadow of the Erdtree expansion. For anyone not familiar, Elden Ring is a popular videogame in the RPG genre that is a wonderful combination of beauty and lore requiring a lot of skill, strategy, and patience to master.
That skill and patience requiring thoughtful stat allocations may ring a few bells, as it shares a lot of parallels with investing. I wrote about that perspective last year when I discussed Asset Allocation for Gamers, but Elden Ring hits hard on an especially important concept that I think is underserved in many investing circles — the risk of ruin.
So if you’ve spent many frustrating evenings like me getting repeatedly wiped out by a certain flame serpent, let’s talk about avoiding the same fate in the markets.
The Reality of Death
To get started, I think it’s helpful to paint a picture to help set the scene.
I mean it when I call Elden Ring beautiful, as the images in this article are screenshots from the actual gameplay. For reference, here’s my own take on a dark knight assassin.
This character took me a lot of time to perfect, but the thing about Elden Ring is that it doesn’t really care how experienced you are. The gameplay is designed to punish overconfidence quickly and resoundingly. So even if you’re a skilled gamer with high-end weapons and a great build, rushing into a fight will get you killed. A lot.
In fact, the most familiar scene in the entire game is not a popular dungeon, a great lookout point, or even the inventory management screen that any RPG player spends lots of time with. Instead, some version of this will undoubtedly haunt you in your dreams. The Lands Between takes no prisoners.
Death in Elden Ring is part of the experience. In fact the very first open-world enemy you run across in the game is a Tree Sentinel wandering a field whose primary purpose is to teach you that the game is just different than others you’ve played. You’re NOT going to kill that thing for a long time, and the sooner you learn how to sneak by and safely level up, the better.
When you do inevitably die, the good news is that you’re easily reborn to try again. But the punishment that I find so instructive is the cost — your life savings in runes.
Runes are the currency in Elden Ring, and are necessary not only to level your character but also to acquire new items. So starting from scratch is no small penalty! Sure you can eventually earn them back, but the hours lost can never be regained.
That permanent cost in time is where I think investors often lose sight of the big picture. Like currency in a game, money in your investing account that is lost to poor decisions can eventually be earned again given enough time. But instead of just hours, we’re now talking months or years. And eventually your time runs out.
So when I talk about death in investing, I’m not referring to literal death at the end of our days. Think instead of the avoidable wipeouts that eat away at our time. We all have just one life to earn, save, and invest. So when playing the investing game, it’s important to avoid the You Died screen as much as possible.
4 Ways to Avoid Financial Death
Like staying alive in a notoriously difficult game, avoiding ruin in the markets is often easier said than done. But there are a few simple steps you can take to stack the odds in your favor.
Don’t overestimate your skill
The number one issue that gets both gamers and investors in trouble is the belief that you’re too skilled to die. Maybe you’re a fan of glass cannon builds and have lots of experience reading every enemy tell. Or maybe you’ve had success with a few trades and are confident you have the markets figured out.
I hate to break it to you, but you’re not as skilled as you think. And it only takes one sneak attack you didn’t see coming to take everything.
In investing, a good example of being wise with your skill level is to only take major risks with money you’re ready to lose. Maybe that means investing 80% of your money in a safe and well-diversified portfolio and setting aside 20% of fun money to mess around with. So even if you learn the hard way that skill isn’t everything, you’ll always have a solid foundation to fall back on.
Understand uncertainty
One of the major ways that Elden Ring kills you is the element of surprise. Enemies love to hide around dark corners to stab you in the back, and the game designers are devious in how they spring a major boss fight on you without warning. When you don’t see the attack coming, you’re probably going to die.
Believe it or not, markets are even more mischievous than games. That’s because you can eventually memorize the surprise enemy moves after a few tries, but markets never repeat themselves. In fact, over-compensating to mitigate the last market drop is a surefire way to miss the next very different one. They’re crafty like that.
That’s why I love tools like the Heat Map that show not only the most recent investing performance but every timeframe on record. Even when the future is unknown, you can get a good feel for the breadth of outcomes by studying the experience of every player that came before you.
Avoid margin
Judging by the many discussions I track, one of the things that seems to have become a lot more popular lately is the idea of investing on margin. That’s where the brokerage lends you money that you can then invest, amplifying your possible returns. That sounds great in theory right up until the markets fall and you receive a margin call with little or no warning, wiping you out and leaving you with less than nothing.
The equivalent to playing on margin in Elden Ring would be to borrow 100k runes from an in-game banker with the intent of paying them back eventually. Then a dragon stomps you out of the blue, and you’re left with a -100k balance that you have to pay off before you can do anything else. Sound fun?
Even if it sounds great when times are good, margin is the #1 way that investors lose everything. You deserve better. Stick to only investing your own money, and your risk of ruin drops substantially. The markets will still inevitably have bad days, but you will never be left with nothing but debt.
Watch your spending
The mirror side of investing money you haven’t personally earned is the spending that the extra cash encourages. Elden Ring’s system incentivizes you to spend runes as you earn them rather than save, but that’s a particularly bad habit in the real world. Not only will it prevent you from ever truly becoming financially free, but it also greatly increases your pain when times are lean.
If you were to lose your job tomorrow, would you feel secure for a while or would you be in a world of hurt? Even if you have relatively little savings, a smaller budget would make things a lot easier. And I’m not just talking about discretionary things like restaurants and trips that you can easily cut back on, but also big fixed expenses like housing. After all, the bank doesn’t care about your job situation when the mortgage is due.
Be smart about keeping your major bills to a minimum, and managing life’s inevitable curveballs gets a lot easier. It’s not about depravation. It’s about empowerment.
Playing for Keeps
While the gaming metaphor is fun and currently top-of-mind (Messmer is making my life miserable right now), allow me one final moment to speak to you heart to heart. Real talk.
Investing is not a game.
Sure, it’s exciting to investigate portfolio strategies and the feeling of a good return is hard to top. But whenever you start to feel a little too excited about investing, I think it’s a good sign to pause and reflect. We’re talking about your life savings. And unlike Elden Ring, you only have one life to live.
So as you evaluate investing options and consider your life plans, try to keep things in perspective. Invest conservatively. Focus that optimization energy on saving more. And if you do it right, you can set yourself up to have a lot more time to explore fun hobbies without financial worry. Maybe that’s painting, spending time with your family, and yes — even playing a lot of Elden Ring.
Plan wisely in real life, and you can die in a dark castle on your own terms.
Game on.
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