What Monopoly Can Teach You About Smart Investing

Rich Uncle Pennybags may be the Jiminy Cricket to your nest egg.

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You've landed on the dreaded "Go directly to jail. Do not pass go. Do not collect $200." You may be locked up for three turns, but even from your perch behind bars, you can pick up skills on how to become a smarter investor.

Monopoly, that beloved board game you from your childhood, provided hours of entertainment, but it may also have taught you valuable lessons on risk assessment, timing and diversification—all useful tools for investing in the real world. In the eyes of Philip Orbanes, there's no better financial starting point.

Orbanes, author of the new book "Monopoly, Money, and You: How to Profit from the Game's Secret of Success," has spent more than 30 years judging the United States and World Monopoly Championships. He knows how the game is played; now, he's sharing his knowledge of its intricacies to show what investors can learn from a few hours spent handling multi-colored money and building little green houses.

U.S. News spoke with Orbanes about what Monopoly deals and stock trades have in common, how consumers can avoid bad investments if they apply what they learn in Monopoly, and who stands to profit most from playing the game. Excerpts:

What motivated you to write the book?

Having had the experience of judging the United States and World Monopoly Championship for more than 30 years, I noticed the winners went on to have financial success in the real world. When I went further and looked at the value of monopoly in teaching young people about financial discipline, I thought this is something that should have a lot of interest—because it works.

Trading properties with other players is a key component to the game. Can this teach you how to effectively negotiate?

I think Monopoly is the first and perhaps most significant training ground kids get in learning the importance of the art of negotiation and how to do it. It's the safest way imaginable to learn the impact of financial dealings, because you don't lose real money if you make a mistake. Along the way, you pick up how to be an appealing trading partner—meaning you don't rub people the wrong way when brokering a deal—and at the same time be able to get a little more out of the deal than your opponent does.

[Read: 2 Simple Steps to Make Your Retirement Savings Leap.]

I think a lot of my friends won because they rolled the right numbers on the dice when they needed to, or someone seemed to make Free Parking their second home. How does luck factor in?

Monopoly is reflective of the impact of chance in real life. The game is more significant in teaching life lessons than a game like chess, where there is virtually no luck. No matter how much control we think we have over each day, or each fiscal year, in reality we don't have control over all the unforeseen events that will happen.

Timing is seldom under your control. For example, there may be a time you want to buy a new home in six months, but lo and behold, the home becomes available today and you're not in the right financial position to buy it. You have to know when the window of opportunity is closing. In Monopoly, real estate is the same way: You land at a property you may not want to buy yet, but you realize you have to put it up for auction, which may be a risk you're not willing to take.

What's one of the most important investing skills people can learn by playing Monopoly?

Monopoly requires you to have diversification. You want to buy a blend of properties; don't put all your eggs in one basket. One lesson is you're going to need one color group you need to develop, but that probably is not enough to win the game. You're in good shape if you have utilities and railroads to earn cash to fund your Monopoly.

It's the same thing in real life. You don't want all your money in one stock; if it tanks, you're out of luck. With diversification, you don't put yourself at risk for something painfully negative if one stock crashes.

You write in the book that many successful people you know view money like a scorecard—the more points they earn, the more they feel they're succeeding. Is that a good way to approach your finances?