Investing vs gambling. We shouldn’t confuse the two but often do. And to be fair, some investment decisions look a lot like gambling. Investing gives you ownership of an asset with potential to increase in value over time. In most cases, this asset will provide some sort of income while you wait. This could be in the form of stock dividends, bond interest, or even rental income. Just because investment returns are uncertain, doesn’t make it gambling. Gambling is betting on the outcome of an event. There’s no ownership of an asset and no interest or dividends to receive. These are two completely different things.
Going all in is for gamblers, not retirement savers. When gamblers go all in and win, they are rewarded for the risk. Other times, they get wiped out and walk away from the table humbled. Rather than going all in when the stock market is at all time highs, stick to your plan. The market never goes up forever.
Stay focused on your investment objective, risk tolerance, and time horizon. Let these be your guide. Everything else is just noise and needs to be tuned out. Stay diversified and re-balance your funds to make sure you’re not overly exposed to one asset class. It might be tempting to dial up your risk level when the market it moving up, but remember, markets can change direction fast.
Investing vs Gambling – Don’t Gamble With Your Investments
Holding concentrated stock positions or aggressive allocations isn’t technically gambling. It is definitely risky behavior. I’m not suggesting you avoid risk completely, but spread the risk out.
I see people making risky investments so they can receive a fast payoff and overextend themselves. But, you’d be surprised how much you can save by investing a little bit over a long period of time. You can save even more by investing a lot over a long period of time.
Investing vs Gambling – Don’t Neglect Your 401(k)
As an advisor, I often encounter folks who aren’t participating in their company retirement plans. It is very common for company retirement plans to offer matching contributions to whatever you save up to certain limits.
If someone told you about an investment opportunity that promises to provide 50% return on your invested money, or even better, 100% return on your money, you’d think it was too good to be true right? In most cases it is too good to be true. But in the case of many company retirement plans, companies will put in 50% or even 100% of your contributions (up to a certain limit). An example would be deciding to defer $100 per pay check. You put in $100, and the company matches with $50. There’s your 50% return on investment!
Not all company retirement plans are the same, and of course, there is a whole lot more to participating in a plan than what was mentioned here. Take another look at your company retirement plan. If it offers matching contributions and you’re not participating, you are leaving money on the table.
Be an investor with your money, not a gambler. Take calculated risks that match up with your investment objective, risk tolerance, and time horizon. Remember, going all in is for gamblers, not retirement savers.
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