Gambling, once viewed as an unspeakable bad habit or addiction to be
defeated, has now become mainstream entertainment. More states have
lotteries, poker tournaments air on prime time television and online
gambling has become a billion-dollar industry. What once was disgraceful
is now commonplace.
The gambling industry makes an easy comparison to the financial
services industry. Here’s how it breaks down. For many, investing is
much like gambling. They have money with which to speculate and, with
dollar signs in their eyes, they put their money into a system that can
potentially give them bigger bucks. They know the system doesn’t always
work in their favor, but believe they can come out on top with enough
patience and practice. They ultimately decide the chance of winning big
outweighs the risk of losing big and choose to roll the dice on a few
stocks.
If these investors are gamblers, their casino is the stock market. It
becomes a playground for those who have money and want to make more. The
potential is there, but even when a significant amount of time, energy
and money is committed to the cause, only few people get returns. Even
then, those returns are usually well below the expectation or perceived
potential.
Continuing the analogy, Wall Street is "the house." They set the
rules and run things behind the scenes. They invite people in, knowing
they hold the key to their success. Some may win a game here and there,
but in the long run, it’s the house that will come out on top. Casinos
have very extensive and expensive surveillance systems that keep players
in check and protect the system. In the same way, Wall Street has its
own systems in place that keep its own people (brokers and product
manufacturers) on the winning side.
The problem with this gambling analogy is that it reflects the
commonly held viewpoint. One, unfortunately, that’s easy to hold given
the financial services industry’s current structure. Consider this
example. During the bear market of 2000 to 2002, the worst since the
Great Depression, investors lost trillions of dollars. Fidelity
investors, to cite one specific example, lost more than $200 billion.
However, while
portfolios plunged, Fidelity owners added $1 billion to their bottom
line during that same time frame. The house won.
It will always be true: the house wins. Whoever is making the rules
and running the game will come out ahead. Most people go wrong, however,
by making futile attempts to beat the house at its own game. Many try to
beat the system by attempting to pick stocks and time the market on
their own. It’s done with the same futility as trying to beat the house
in a casino. In reality, the key to success does not lie in trying to
beat the house at its own game, but in becoming the house.
Investors can take matters into their own hands and turn the tables on
Wall Street.
How? By realizing they can own the entire market. Our capital market
system gives anyone, everyone, a chance to own the market which, in its
efficiency, expands and grows almost 80 percent of the time. It’s a
system that lets investors become the house. They can set the rules.
They can sit back and add up the money, rather than watch their money
line Wall Street’s pockets.
It’s done with a Market Return Portfolio™, one that owns the market
by including literally thousands of securities in a wide variety of
asset classes, including many—micro cap, small cap international, value
and emerging markets—not commonly seen in investor portfolios.
There will always be those who try their hand at beating the system.
But it’s the stock pickers and market timers who keep the system
efficient. In order for you to win as the house, there must be those who
participate in losing games. And there always will be. In every casino,
there are people who spend all day putting coins in the slot machine or
rolling dice at the craps table and walk away empty handed, only to
return the next day. The same holds true with the market.
Investors should not be gamblers. Investing is only a gamble when you
try to win by someone else’s rules. When you take control and set
the rules, the system works in your favor. Yes, the house will still
win. But you’ll be the house.
