Investing not Betting

The growth of online gambling has been remarkable, and there is no sign of a slowdown. The global market is now ‘worth’ over $100 billion annually and projected to double over the next ten years. The drivers of growth include technology (which has made placing bets all too easy), a more relaxed legal framework, and slick, glitzy marketing.

Sports betting has led the way. This area of gambling now extends well beyond predicting which team will win a game. You can bet on the ‘over/under’ of the length of the national anthem sung at a game, or whether the Super Bowl will be subject to an alien invasion (really!). The sports industry itself reaps large financial benefits from the betting industry with lucrative sponsorships and massive advertising expenditures.

This is all a far cry from my early exposure to local bookmakers in the UK, which served those who were inclined to pin their hopes on a fast-running horse or dog. The bookies’ offices were dark and dank, and full of cigarette smoke. The bettors were usually gaunt, gray-skinned men with eyes glazed by dashed hopes. Perhaps this insalubrious atmosphere helped keep people’s motivation to gamble in check. Current advertising campaigns present a much more exciting prospect. They highlight the thrill of placing a bet. More troublingly, advertisers often portray people who are joyous after a big win.

While many can dabble with gambling in a controlled way, for example, with an annual trip to Las Vegas, for others, the dopamine rush can become addictive. This all helps reinforce gamblers’ overestimation of their chances of success. Some find themselves pulled into a vicious cycle of habitual gambling well beyond their means.

Cynics, or naïfs, may argue that investing is little different from betting. After all, money is put at risk for outcomes that are unknown. This line of thinking can introduce gambling-type behaviors to investment areas such as ‘hot’ stocks or the crypto markets. The investor/gambler, often a young male, feels they are placing bets in areas where they will make a quick return. The appeal is seductive because occasionally, it might work. However, over time, the house will always win.

From our perspective, investing and betting have about as much similarity as spending an evening with family and friends as opposed to attending an all-night rave. We believe investing should not be exciting. Perspectives should be long, decisions should be phlegmatic, risk exposure should be diversified, and crucially, money should be invested in areas that can add value. Our ‘watching paint dry’ philosophy will not appeal to those looking for a thrill or a quick buck. We are fine with that. Our objective is to help our clients live their real lives without daily anxiety about what is happening to their money. Moreover, we want to help our clients deploy a well-crafted investment strategy tailored to their objectives. This investment tortoise will invariably beat the erratic hare of behaviors that are little more than betting in disguise.

Richard Rushton