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With Super Bowl 57 around the corner, there are more than 50 million Americans projected to bet over $16 billion on the game. Although gambling and investing in the stock market share a few common characteristics, there is an important distinction between the two. The stock market may be at a buying opportunity right now but the hot discussion this week is the odds on the Chiefs vs Eagles.
How Are They Similar?
You have probably heard at least one person say something like “Investing in the stock market is just like gambling; it’s just a casino”. While this statement holds some truth, it’s not completely true. What’s true about it is that both activities involve evaluating odds, making decisions and being patient as outcomes happen. And both the stock market and the Super Bowl are about predicting, or attempting to predict, future success. It is also true that there is no guarantee that either will deliver wins every time you participate.
Control What You Can Control
The main difference between investing in the stock market and gambling is control. An investor can diversify their portfolio and create a balanced approach that mitigates the risks of the various investments. With sports gambling, the entire bet is placed on one outcome that has a finite date, leaving the gambler’s money completely exposed to the volatile nature of the game. People perceive gambling as an efficient way to capitalize on an event with a high payout and they feel they have better control over the outcome of gambling. Conversely, investing in the stock market is not as sexy. It requires patience and long term discipline. Millions are made over years not overnight. And it can be easier to pick one team over another or ‘red’ vs ‘green’. It is less intimidating picking a team verus the decision to select investments from thousands of available options in the marketplace.
Comparing QBs Strategies
Investing in the market and selecting a strategy doesn’t have to be so complex. Let’s consider our Super Bowl Quarterback contenders to look at this example further. Imagine if each QB was an investment strategy. How would we describe each player?
Jalen Hurts is like a diversified or balanced portfolio, which is important for any successful investor. Hurts’ ability to be versatile in both the passing game and the running game make him an excellent representation of diversification. This is like an investor who spreads their capital among a variety of asset classes (stocks, bonds, real estate, alternatives, etc) to minimize risk and increase their chances of realizing success.
Patrick Mahomes is more like an aggressive growth investment strategy. Mahomes often takes risks and if his plays aren’t there, he is scrambling in the pocket to attempt to make a bigger play. An aggressive growth investment strategy focuses on achieving high returns through aggressive investments, often with higher risk. Mahomes could make some clutch plays or fall flat on his face. It can often work to the Chief’s advantage but it’s unpredictable.
Not the Same
Investing in the stock market and Super Bowl gambling share some common characteristics such as risk taking, patience, research and dedication but offer different levels of control. Understanding these differences will help investors create robust portfolios while enabling gamblers to make better decisions when betting on sporting events, like Super Bowl 57.
At CAM Investor Solutions we can invest in any style that suits our clients depending on their goals, objectives and risk tolerances. Most often our approach is going to be more Jalen Hurts by maximizing the return and minimizing risk for a consistent return especially when coupled with financial planning. You don’t have to pick investments like football teams anymore. Reach out to us to see how we can find a better approach and help you win.
M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. As a fee-only firm, we do not receive commissions nor sell any insurance products. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees.
This blog has been provided solely for informational purposes and does not represent investment advice or provide an opinion regarding fairness of any transaction. It does not constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss. Tax planning and investment illustrations are provided for educational purposes and should not be considered tax advice or recommendations. Investors should seek additional advice from their financial advisor or tax professional.