Play Only If You Can Afford To Lose It All

February 27, 2013
by Michelle Perry Higgins

Start Shopping for Long-Term-Care Insurance at 45Does “play money” help investors keep on track with most of their money – or does channeling one’s “inner Warren Buffett” do more harm than good?

My answer depends on how the client responds to the following question: Would your lifestyle, today or in the future, change to any degree if you lost 100% of your play money? If the answer yes, then the play money/mad money allotment is too much. Always remember that any play money an investor portions off should not impact their financial plan on any level and should be viewed as dollars that could disappear tomorrow. Basically it is your “gambling” money. If an investor loses 100% of the investment and his or her present or future lifestyle remains unaffected, then the designated amount is acceptable. Play money is great for that Buffett type of investor. It allows him or her to research and discover unconventional investment opportunities she might not otherwise have explore.