Have you noticed how gambling – especially online gambling – has gone mainstream? I like watching professional sports, such as the Super Bowl, and it has become impossible to escape the ads urging viewers to bet on games. Too bad, too.
In researching this column, I was struck by the theme that today’s young adults are the first generation to grow up in a society where gambling is not only widely available but routinely marketed. Companies have resources and messaging talents to push gambling into almost every corner of society. To be sure, for most people placing a bet on a game is a sporadic activity and harmless fun. (Think March Madness office pools.)
Yet no should act surprised that gambling is a growing concern with so many avenues available for placing bets. (Remember the legendary moment in “Casablanca” when the corrupt police chief played by Claude Rains memorably closes Humphrey Bogart’s casino with the phrase, “I’m shocked — shocked — to find that gambling is going on in here!”)
The betting mindset among individuals includes the markets. Of course, the stock market is often called a casino. Plenty of punters have been long drawn to speculating on stocks and other securities. Nevertheless, the lure of rapid-fire bets by individuals is on the rise with online trading firms cleverly turning trading into more of a videogame. The lines between online gambling, stock speculation, and video gaming are fading fast.
I realize it isn’t always easy to distinguish between investing and gambling in the markets. I became a long-term investor when I started putting money from every paycheck into a diversified retirement portfolio. I was also making a bet that Corporate America would continue to demonstrate impressive levels of entrepreneurship. The bet has paid off so far. The odds of achieving your personal finance goals are sharply improved by sticking to a patient investment framework that focuses on managing risk through asset allocation while keeping fees low.
The record is also clear that there is no evidence individuals rapidly trading outperform the patient investor. There is plenty of data suggesting the more individuals trade the more they lose money over time. Whether the topic is gambling online or meme-speculation, an observation made by Chris Welles, a pioneering financial journalist and former colleague while reviewing a book documenting the rise of corporate-backed gambling, holds true. “For everyone but the house, gambling is a bad bet,” he wrote.
Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media’s “Marketplace.”