Does knowing how to play chess help investors?

Professional chess players think about the people sitting across from them, their opponent’s strategy, how they move across the board, and how they’ll respond to each move. Some players are more aggressive, others more defensive. Although their strategies can be completely different, they know how to respond to a sharp queen or an early castling. By analogy, people who invest act similarly. They respond not only to the investment market, but also to their own way of “playing” it. 

Chess players know the rules so well that in the blink of an eye, they move their hand and make their next move. While brilliant moves or masterstrokes do happen, their play usually relies more on deep knowledge of the game and, of course, on strategy. Likewise, an investment expert knows how they want to move their money. 

Someone who moves the queen — the most powerful piece on a chessboard — from the start, without fear of it being captured, moving aggressively and swiftly across the board as if they own it, is someone who has a certain tolerance for risk. They are someone who is capable of managing risk well. Translated into the language of investment or financial markets, this is someone who is willing to invest boldly. 

What if the opposite is true? Someone who protects the queen as much as the king, who keeps her at the back, treating her with a certain respect. More than that, they play defensively above all else. They don’t hesitate to use their first moves to advance the king’s bishop and knight to castle early. This person carries one principle like a banner: the king’s position at the start of the game is vulnerable, so the sooner it’s shielded and protected, the better. In the world of investing or the financial market, this person has a lower risk tolerance, protects their assets, and is more focused on saving.

Both in chess and investing, there are different ways to play, but also some core characteristics that define both worlds: a deep knowledge of the rules, brilliant ideas, and above all, strategy.

There are three types of investor: conservative, moderate, and aggressive. Just like in chess. Determining an investor’s profile is the starting point for making decisions. One of the most important rules on the investment board is that return and risk are proportional: the higher the expected return of a product, the greater the risk assumed. Risk is understood as the possibility that the investment may not deliver the expected results or, worse, that part or all of the capital invested may be lost. 

A person who doesn’t wait to bring the queen into play in a chess game has a riskier playing style. They want to put their opponent on the ropes, make them sweat from the very start. In short, they want a quick, decisive victory. But they also risk their opponent reading their intentions and counterattacking to take out the queen. This player would be the aggressive investor, willing to take on a high level of risk to achieve very high returns. When investing, they focus on high-risk products like equities, day trading, financial derivatives, cryptocurrencies, and so on.

In just four moves, a composed chess player can castle their king. They can move the piece out of “checkmate” in the center of the board and place it safely on the side. They can protect it, just like a person would with their savings. This more defensive attitude fits that of a conservative investor.

Conservative investors are characterized by their unwillingness to lose any of their money under any circumstances. However, just like chess players who prioritize defense over attack, they must accept that their returns will be low. That’s why some of the products they choose include fixed income, deposits, or guaranteed funds.

Knights add strength to moves. They help develop strategies over the medium to long term. They are precise, advance relentlessly, and often pressure the opponent. Depending on the type of chess being played, knights aren’t the most essential pieces on the board. They are functional: more valuable than a pawn, but less than a rook or the queen. And their importance varies depending on the stage of the game. They represent what the average investor tries to achieve: a balance between return and risk.

This type of investor is willing to take on some risk—and therefore some level of loss—in exchange for higher returns. As a result of this approach, their portfolio is diversified: it may include both fixed income and equity products, ranging from bonds to stocks or mixed funds.

Beyond the style of play, an investor can learn other lessons from a chess player that also apply to the financial or investment world. For example, nothing guarantees that a move that worked against one opponent will work against the next. Or, put another way: past performance is no guarantee of future results.