Are you Gambling or Investing?

gambling investingWe’ve all heard the old adage that investing in the market is the same thing as gambling. With America’s #1 wagering event, the Super Bowl, still fresh in our memories, it seems like a good time to take a look at the truth behind that statement.

According to, $87.5 million worth of legal bets were placed at Nevada sports books on last year’s Super Bowl. That sounds like a lot, until you read the next line. Legal wagering accounts for only 1% to 1.5% of all the gambling done on the big game. Do a little math and you’ll find that an estimated $8.6 billion was wagered on the Super Bowl last year, and that only accounts for gamblers in the United States.

Obviously the Super Bowl generates a lot of betting action, but when it comes to investing in the market you would assume that more people would be on board, right? Apparently not. A Gallup survey taken in 2011 discovered that 54% of Americans own stocks and according to writer RJ Bell, over 50% of Americans bet on the Super Bowl. However, while the rates of participation are similar, there is a stark difference between investing in a promising company and picking your favorite team on the money line.

The biggest difference is asset ownership. Many people forget that when buying stock in a company you’re not only asserting your opinion that the value of that company will rise, but also taking a partial ownership of the assets of that company. The money that you invest is equal to a piece of those assets. Try explaining to Steve Bisciotti how the $1000 bet you made on the Ravens at +3.5 should have gotten you a seat in the owner’s box when the big show was in the Superdome.

If you’re thinking that market investing isn’t as exciting as the all or nothing bet you placed February 3rd, you may be interested to know “that the neurological similarities between traders and gamblers are striking. Whether they are about to make a trade or plunking down a bet,” said Maggie Baker, a clinical psychologist interviewed by the Wall Street Journal, “the pleasure center in the brain lights up.” So, it feels good to bet, but it can feel just as good to invest. The trick is making sure that you’re actually investing smart, and not just using the market as a surrogate sports book.

Jeff Mackie, writing for Breakout on, has identified three indications that you may be doing more gambling than investing with your portfolio.

Stock Picking – Putting money into one stock, instead of diversifying across several companies, makes investments much riskier.
Market Timing – Buying low and selling high is the key, but making sure that there is balance across your portfolio is more important than predicting booms and busts.
Track Record Investing – Hanging your future on one fund manager, no matter what his track record, is unwise. Spread the risk and reap the reward.

One day, instead of just planning a party, you’ll have enough money to buy your own ticket to the Super Bowl. Just don’t forget, if you do bet on the game and win, the IRS wants its piece. Gambling winnings, just like dividends, are taxable. wagered-on-the-big-game-012012/ 1999.aspx 37330.html 143026282.html


There are so many unknown variables when picking individual stocks (literally trillions), that is why it is impossible to consistently guess which ones are going to go up or when they are going to go down.

The lure for stock speculators is similar to the gambler… the excitement that is felt and experienced when they hit the big winner. When we watch the markets we see big winners every day. Similar to walking through a busy casino, we see winners all of the time. This preys on wish fulfillment…why not me?

Just one big winner keeps them coming back until they can break their addiction. Just like the gambler, this usually does not happen until they hit bottom, after the inevitable several big losers in a row.

When picking individual stocks, it becomes an obsession. They check the news and the price almost every day. They think about the stock almost every day, if not every day. I have seen it happen over and over again.

Apple is the latest hot stock to cool off. Will the next big move be up or down? It’s anyone’s guess.

Wednesday Wisdom from Mark Matson

Should investors try to predict the future?
“I always have to remind investors to stop playing God. Specifically that means stop trying to predict the market, and stop trying to forecast the market. Above all, it means stop trying to find anyone else who says they can do these things, because anyone who tells you that he can do it is either seriously delusional, uneducated, misinformed, or lying. So don’t ask anyone else to play God when building your portfolio and advising you, because no one can.” Mark Matson

Mark Matson on Prudent Investing

The complexity of investing and the overwhelming tendency to perpetuate self-destructive investing behavior make it seem only natural to seek professional help. Many Americans turn to financial planners, brokers, or fee-based money managers. But are these professionals as a whole any better than Main Street investors when it comes to following the simple rules of investing and applying academically sound investment principles, or are they part of the problem? Are they true defenders and protectors of disciplined investing, or is it a classic case of the fox guarding the chicken coop? The average financial professional is not any more seasoned and prudent than the average investor.

That is why I have dedicated my life to only one part of the planning process —prudent investing.

Wednesday Wisdom from Main Street Money

Matson On Necessary Lie Syndrome

A necessary lie is a lie we tell ourselves just before we engage in unhealthy or dysfunctional behavior. For speculation masquerading as investing, it is, “This time is different. I really do know what is going to happen this time.” You can probably think of a time in your life when you have told yourself a lie just before you acted in a way that was self-destructive, and you may be able to identify times when you have done it while investing. This is the brutal type of self-assessment that is required to be a successful investor.

Elections Impact on the Market

Now that the election is over, investors are wondering what the future has in store for their portfolios. The reality is that while elections may have short term impacts on the markets, over the long run, the impact is minimal. A Free Market System is based on capitalism, which always finds a way to thrive. Our structured portfolios are based on a long-term investment philosophy and will be more efficient than active management if and when taxes increase. Our portfolio managers at Matson Money are prepared to rebalance if necessary to ensure you maintain your expected risk tolerance level.
So what should you, as an investor do now?

1. Stay positive. Nothing beneficial has ever come out of being negative.

2. Get educated to break the investor’s dilemma.

a. Fear of the future leads to trying to find someone who can predict the future.

b. Since nobody can predict the future accurately, investors look to track record investing, which academically has proven to be disastrous.

c. Trying to find the right answers leads to information overload, which leads to frustration and emotion-based decisions.

d. Since we as humans gravitate toward pleasure and retreat from pain, we break the rules of prudent investing and sell investments that are doing poorly and buy what’s increased in value.

e. This, in turn, leads to performance losses, which leads to more fear of the future. The investor’s dilemma starts all over again in a never-ending cycle.

We, as investor coaches, are here to help you break the investor’s dilemma and tune out all the media hype of doom and gloom. Every month we offer educational classes to help you understand what’s really important in investing. Our ultimate goal is to guide you along the road to true investing peace of mind.
Call us to find out when the next investor coaching session is and reserve your seat.

How to Prepare your Portfolio for the Unknown

Unless you’ve been living under a rock since New Year’s Day, you should be well aware of the

tumultuous events that have been taking place around the world – the disaster in Japan and the

uproar in the Middle East and North Africa are just a few global measures that are causing

economic changes around the globe. We’ve seen gas prices soar and a rise in food and beverage

commodities, but the place in which these changes are especially apparent is the stock market.

Inflation has caused investors to shift their assets and determine which of the world’s financial

markets are being hit the hardest with higher interest rates and a rise in inflation. If you have any

game pieces playing in the stock market you’ll surely want to know which markets are being

affected by the ever-changing economic fundamentals. Let’s discuss the possible risks that your

portfolio faces, and aim to strengthen any weak spots.First off, let’s discuss the risks you must

consider – inflation and interest rates. These are two of the biggest factors to put into perspective

when considering stock market choices. Currently, higher energy and commodity costs are

sticking it to both consumers and producers. However, the big question that investors need to

mull over is how much of these high prices are due to speculation. Instead of looking at

speculations in the stock market, it’s crucial to consider supply and demand realties, and how

they will subsequently affect inflation, and in turn interest rates. Possible solutions to market

volatility and the risk of rising inflation and interest rates starts with broadly and efficiently

diversifying your portfolio. Here are some suggestions of market choices to invest in during this

time: U.S. and international stocks, commodities, inflation-protected bonds, real-estate

investment trusts and cash, all of which have the ability to withstand inflationary bouts.

Next, let’s discuss the risks you must anticipate – war, disasters, political and economical

upheaval and social unrest. While the stock market is extraordinarily resilient, and has been

fighting against all the shocks in 2011 so far with great momentum, it’s hard to say whether it

will continue to stand firm against the current troubles in the Middle East and Japan that are

disrupting the technology, automobile, and oil industry. Possible suggestions for anticipating

these risks include adding gold and other precious metals to your portfolio, as well as

implementing hedge-fund-like long-short strategies, which attempt to generate stock-market

returns, but with lower risk. Essentially, you bet that some investments will rise while others

will fall.

Of course, we must discuss the risks that never go away – markets and companies. Yes, market

risk is inescapable, but don’t view your portfolio like betting at a horse race – because the

favored winner may inevitably lose horribly. The key to market strategy is diversification and

implementing a safety margin. Keep these three risks that all investors should understand in

mind: valuation risk – overpaying for an asset, fundamental risk – buying something that turns out

to be flawed, and financing risk – using leverage. Other suggestions include avoiding

concentration in similar stocks and mutual funds, as well as never overlapping markets or


Finally, a risk you must fear is that of playing it too safe. It’s a difficult balance to find – risk it

all and you could end up with too many losses, risk too little and you could be in danger of not

having enough money in later years, and of missing major market advances. Any suggestions

for not playing it safe simply revolve around going around your judgments and taking small risks

that yield small returns. Hopefully then you’ll start to feel more confident in your investing

strategy. Unless you can predict the future, it’s crucial to embark on a strategy that will preserve

capital in a period of heightened volatility. Simple steps like assessing risk, identifying

opportunities and looking past the present and into the future can shed light on how to handle the

markets twists and turns. And even though the future of the stock market can never be certain, at

least you can equip your portfolio with a nice safety net.

2012: New Year, Same Advice

We have all been conditioned by the financial services industry to ask the question, “What will the markets do in the new year?”  There is always someone in the financial services industry who will attempt to answer that question with some prediction.  Sometimes they guess right, but more often than not they guess wrong.  Our answer to that question remains the same:  WE DON’T KNOW WHAT THE MARKETS WILL DO THIS YEAR!

We are not fortunetellers.  We do not own and do not want to own a crystal ball.  The financial markets are controlled by over six billion people making daily buying and selling decisions.  One of our basic views is that no one knows whether the markets will go up, down, or remain unchanged over the short or long-term.  What we do is properly position our clients with well-diversified, efficient portfolios to take advantage of market conditions.  Our goal is to obtain market returns.

One of our most important responsibilities to our clients is to provide the coaching to keep you disciplined.  We can help you to stay focused on your long-term goals and not panic when markets go lower and not to become greedy when the markets rise.  Investing this way is not necessarily glamorous or sexy, but very prudent.  Fear and greed are the two most powerful emotions that destroy investors’ peace of mind and their investment returns.

As we enter 2012, we hope you have peace of mind on your investments and retirement goals.  This is accomplished by attending our Coaching classes where we teach you more about our Free Market Investment Philosophy, our Free Market Efficient Portfolios, and our Free Market Strategy for capturing Market Returns with lower volatility.

Our advice remains the same:  turn off the hype on TV, don’t listen to the talking heads and recognize that they have no idea what is going on in the future with the markets.  Finally, as a believer in our investment philosophy, invite a friend or relative who is not taking advantage our coaching to come to one of our seminars.  We truly want to “save the world one investor at a time!”