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Are You Gambling or Investing?

Seth Jentner08/30/2016

Do you enjoy betting at the casino? Would you consider spending your time at a casino a sound way to prepare for your retirement?

Most people I talk to who enjoy gambling are smart enough to set a budget for their gambling, maybe $100 or $500, to go and have some fun at the tables or slot machines. Sometimes they come out ahead, but when they lose, they consider the money they lost as part of their vacation expenses.

But is relying on cash flow from casino gambling an effective way to become financially independent in your retirement? Probably not. But there is a way you can make money at the casino!

Own the casino! When managed well, the house wins in the long run even if it loses from time to time.

The same is true for investing. To speculate on a few companies or on daily market movements is much like gambling in Vegas! You win some and you lose some, but most people lose more than they win.

But if you own the casino—if you own a globally diversified portfolio of stocks, bonds, real estate, and commodities—you have the opportunity to invest in the collective efforts of the entire world, the casino if you will. Historically, the odds have been in your favor that a well-managed globally diversified portfolio will increase in value due to the efforts of billions of people worldwide engaged in economic activities.

Yes, there will be ups and downs along the way. But long-term success is probable.

Trying to time the markets or concentrating your bets may sound smart, but it’s usually not. It may produce large rewards sometimes, but it generally won’t persist. Instead, use diversification to improve your odds of long-term investment success.

For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.