Gambling or Investing?

Wall Street, like Las Vegas, has built an adult playground where those visiting feel they are in control. and there is a chance they will hit the winning jackpot. Having just attended and spoken at the Las Vegas Money Show the similarities grow more and more similar. Walking the aisles of the exhibit hall it became abundantly clear just how many people think they have built the perfect strategy or system for beating Wall Street at it’s own game. Unfortunately beating Wall Street or the Financial Markets isn’t what investing is all about to begin with. The idea is to gain an understanding of the opportunities and determine if the risk of the ‘game’/investment meets with your profile or experience for putting your money at risk. Too much attention is paid to getting “21” in blackjack or if it will be red or black in roulette. The better process is an understanding of the game we are playing and how to manage money in light of the risk we are taking.roulettewheel

Many an article has been written about how the goal of most on Wall Street is to get personally rich from your money? It may be difficult to validate, but the public opinion is in favor, thus the continued bashing of those on Wall Street. If there is any truth to the accusations, the real blame still falls on the investors, my opinion. I am not saying in any way it is okay to lie or cheat others, but I am saying that we need to be responsible for our money. If it sounds to good to be true, it probably is. If you don’t fully understand what is being pitched to you, say NO! Just like drugs, investors need to learn how to “Just Say NO!” Don’t buy what you don’t understand, and don’t invest in something you can’t track have confidence in long term.You are better off buying a CD or Treasury bond than buy a pie in the sky investment.

While standing in the casinos and then the exhibit hall I found it difficult not make the comparisons between gambling and trading. In Vegas the house always wins! Otherwise, the hotels would not survive. You would believe that most people walking into a casino know and understand that. If they did, wouldn’t the place be empty? Not necessarily, there is that chance they will be the one to hit the jackpot. They will defy the odds. Unfortunately most investors apply the same logic to investing. Betting on what everyone is buying or what is hot now, isn’t the best logic to apply. I have been investing money for more than 30 years and it isn’t easy. It is a matter of knowing your purpose, having a strategy and the discipline to implement the strategy that allows you to win or at least have a chance of winning when it comes to investing and Wall Street.

It is interesting to note that what is boring tends to win on Wall Street, not the exotic or hot strategy of the day. Disciplined strategies that are focused on the longer term view is generally what works the best. Betting on what is going to happen today is like picking red or black at roulette and hoping that green (zero or double zero) doesn’t play into the equation.

John Bogle has compared Wall Street to Vegas for many years. He believes the fees charged by Wall Street are designed to skim a “small fee” off the top to compensate the companies designing the products they sell. The belief is they take more of the earnings than they deserve. Thus, his launch of Vanguard Funds. Give the investors a fair deal at a fair price has always been his motto. His funds were index based and designed for the long term outlook. Unfortunately most of us are too short sighted to wait for the outcome over 15-20 years. Thus, we design ways to beat Wall Street at its own game. Really? Can you beat Vegas at it’s own game?

Our job as investors  is understand the purpose for investing our money. Design a strategy that will best fit the accomplishment of our purpose and practice a discipline that will allow us to follow our strategy in order to fulfill our purpose for investing. Stop, take the time to define your strategy and discipline for investing. STOP Gambling with your future and focus on a discipline that will get you to your objective over time.

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