Every day, there seems to be some news blurb or profile of someone who's made it rich quickly. Whether it's a new YouTuber, cashing in advertising revenue, or a startup idea that got gobbled up for millions.
A few weeks ago, the Wall Street Journal profiled a 25-year-old guy who amassed more than a million and a half dollars day trading stocks during the pandemic. But surprise, surprise, as his fortunes rose, so did his sports gambling, luxury cars, and bar tab. And in the end, the boom busted. He now works at a deli in Las Vegas for $14 an hour.
When you're 25 years old, watching your bank account show a dollar sign and two commas can make you feel invincible. The quote that caught my attention, though, is when he said, "[he] started treating the market like a casino."
In a casino, the deck is stacked against you. The longer you play, the greater the odds you'll lose money since the house always holds an edge over the players. But this is not the case in the stock market. Historically speaking, the longer you invest, the better your chance of positive results, as long as you're able to stay out of your own way.
Gambling at the casino is a form of entertainment. Successful investing is not supposed to be entertaining. Gambling is the possibility of making money. Successful investing is built around the probability of making money.
Following financial news can be entertaining, but good investing should really be relatively boring. Investors need to remember this when they're in search of investment advice as well. The talking heads on money channels or online are there to entertain you. They don't know your goals, fears, savings, or tax situation. If they can keep you entertained and clicking and watching, their mission is accomplished because advertisers will come to them.
In fact, there's been research done on Jim Cramer at CNBC. Did you know that over five years, from 2017 to 2021, he made over 12,000 stock picks, and none were based on your situation, goals, or time horizon? So, while any of them might have offered the possibility of making money, they definitely don't constitute an investment strategy with any probability of success.
When it comes to your future and your financial plan, leave the entertainment to the casino and financial journalists and look for investment strategies based on history and probability. It might sound boring, but boring is usually beautiful when it comes to long-term investment success.
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Shane Tenny is the managing partner of Spaugh Dameron Tenny. Along with hosting the Prosperous Doc® podcast, Shane has a true passion for behavioral finance, helping clients and audiences understand how to develop successful strategies based on their unique temperaments. An accomplished and highly engaging speaker, Shane is regularly interviewed for television and podcasts, is actively involved in the Financial Planning Association®, and contributes to industry advisory boards.
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