There is a chance you could be right.

Wall Street has often been referred to as an advanced form of gambling. However, it is not that often that your entire investment goes to zero which is a large difference when you place your money on 29 black and the little ball lands on red. Investing might have the aspects of gains and losses, the risk, and the potential reward. It does not have an immediate decision on winning or “poof” nothing left from the wager.

If wagering on a football game, the main bet is which of the two teams will win. Any bet placed theoretically has a 50% chance of success. If we are placing a win bet on a horse in a horse race with 20 horses, your chance of success is reduced by having more potential winners. Placing the one bet to win for the Final Four well before we even get to the sweet sixteen and the chances of the big win get diluted by percentage. With any of these bets as an investment, once the game is over you either have the money or you do not.

Meanwhile back at the stock market, if we take the gambling analogy, place a bet on one stock that will change your whole life from the gains (yes, some people have this thought process about individual investments). There are roughly 15,000 publicly traded stocks on the exchanges to pick from. Some realities should be setting in here. First, to pick one stock out of the list that will be the top performer out of all of them would be statistically difficult much less research and theory difficult as well for numerous reasons. Next issue is that by overall percentage, investors do tend to make gains in the stock market over time. Which means that there are not just one or two stocks that “win”, but sometimes thousands of them that perform each year. Under these realities, the stock markets resemble gambling less and less.

As Financial Professionals, we may pick out certain stocks or bonds or funds from the markets to use. However, it is the blending of these investments that provides an allocation to reduce (not eliminate) downside risk. It would be extremely rare and possibly out of character for anyone in our profession to recommend placing all your funds into one individual investment. We do not place bets, we create strategies.