In the short run, there are a lot of similarities between gambling and investing. Both provide immediate feedback if you’re “winning” or “losing”. It probably goes without saying— it’s more fun to win than lose in both!
In my 20+ years, I have met with many people who believe “the market is rigged” or that the stock market is like a casino.
It is understandable why people might feel this way if they’re focused on short-term fluctuations. Typically, when fear is driving markets, that is when you see violent swings in both directions.
Often, this is when more people are also paying attention to the stock market, and volatility can validate these beliefs.
There’s an old saying: “the higher the VIX, the higher the clicks.” In my experience, that definitely holds true.
Over a longer time horizon, the differences between investing and gambling become much clearer.
Casinos and online platforms want to keep you playing because the longer you play, the better the odds are for them.
Long-term investing has historically worked exactly the opposite way. Historically, the S&P 500 has been positive roughly 3 out of 4 calendar years.
More importantly, the longer the time horizon extends, the more the odds shift in favor of disciplined investors. Regular contributions, reinvesting dividends, economic growth, innovation, and most importantly, compounding work in favor of investors over time.
None of this makes investing easier. Even with odds on their side, investors make emotional decisions.
It simply means that having a disciplined long-term plan increases the odds of success over time.