Stock Markets Are Not Like a Casino

Paul Barreca - Jun 04, 2024
Most of us have been to a casino at some time, and we usually walk out with less money in our pocket than we came in with. No surprise here, as we know the odds are always in the house’s favour.

Most of us have been to a casino at some time, and we usually walk out with less money in our pocket than we came in with. No surprise here, as we know the odds are always in the house’s favour.

According to the American Gaming Association, the odds of the house winning for a few popular games are:

  • Blackjack - 50.5% - 53%
  • Roulette – 52.7% - 55.3%
  • Baccarat – 51.1% to 65.6%
  • Video Poker – 50.5% to 55%

Naturally, since the odds are always in the house’s favour, the longer you play, the greater the chance you’ll walk away with less money than you came with.

Now here are the odds of profiting invested in the US stock market from 1926

    • 56% of the time on a daily basis
    • 63% of the time on a monthly basis
    • 75% of the time on a yearly basis
    • 88% of the time on a 5 year basis
    • 95% of the time on a 10 year basis
    • 100% of the time on a 20 year basis (1)

Two things seem obvious to me when comparing stock investing to the casino.

  1. The odds are heavily in your favour of earning a profit in the stock market. This is the opposite of going to a casino where the odds are not in your favour.
  2. The odds of success when investing in the stock market increase the longer you stay in the market, which is the opposite of a casino, where your chances of success decrease the longer you play.

Successful investing has historically always been profitable for those with patience. While boring compared with gambling in the short term, over the long term, I find the excitement of building wealth that allows one to control their own destiny offers far more satisfaction and excitement.

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The World Is Getting Worse “Fallacy”

The world we live in is a much better place by virtually all metrics than just a generation ago despite the ongoing bad news heard daily in the media. Here is one more example.

“In 1900 the average American family spent nearly 80% of their pay on necessities (food, clothes and housing). People spent more than 40% of their income online food. Owning a home feels out of reach for many young people today but less than 20% of households owned their home in 1900.

The homeownership rate is now more than 60% while household spending that goes towards necessities has dropped to less than 50%.1 The amount spent on food is now less than 13%.”

 

Best

Paul

 

*The views and opinions expressed in this article may not necessarily reflect those of IPC Securities Corporation

    1. 1The Stock Market is Not a Casino - A Wealth of Common Sense