Viva Las Vegas
Over the long MLK weekend, I went to Las Vegas with my wife and six of our friends. They all joked that hanging out with a financial planner in Sin City wasn't going to be any fun. There's some truth to that because Vegas really isn't the ideal getaway for an introverted financial planner who doesn't like to gamble and whose idea of a fun evening involves a good book and lights out at 10PM.
I may not have gambled while in Vegas, but that doesn't mean I'm a total stick-in-the-mud: I stayed up well past my bedtime every night. I like living on the edge.
The eight of us did the usual things people do in Vegas: Eat, drink, go to shows, and gamble. Fortunately, everyone took a sensible approach when it came to gambling. Each couple agreed upon an amount of money they could use, and possibly lose, while gambling. No one raided their bank account with the goal of winning back money lost at the blackjack table.
Gambling Versus Investing
While in Vegas one of my friends asked a good question: "Isn't investing in the stock market the same as gambling at a casino?"
The short answer: No, these activities are not the same.
The long answer: I understand why one might think investing and gambling are essentially the same. On the surface, both activities entail putting your hard-earned cash at riskofa gain (yay!) or a loss (boo!). Of course, there are some key differences that may not be obvious. Let's look at what differentiates these activities:
- Ownership: When you buy shares of an index fund or a company, you own part of a company or companies. Gambling gives you nothing - except maybe some free drinks.
- Potential long-term income: When you own shares of a company that pays dividends, you'll have an income stream for as long as you own the shares. Gambling might pay off, but it's usually a one-time event.
- Appreciation: The value of those shares you purchased might become more valuable over time. Even better, you can then sell the shares and enjoy a gain.
- Odds: Casino operators won't be in business very long if they allow gamblers to win too often. That's why the house has an edge in all of the games they offer. Some odds are better than others, but they're never in your favor.
- Luck: Whether it's a roll of the dice or the hand you're dealt, gambling features an element of luck. There's an element of that when it comes to investing, too. The difference is that investors can educate themselves through research prior to buying shares of a company. There's no way to research what will happen with the next pull of the slot machine.
There is one important thing both investors and gamblers need to do: Understand the rules of the game (or investment). I've seen many people take action without understanding what they were getting themselves into. The only thing they accomplished was giving their money away.
Finally, I should add one more thing before being called Debbie Downer: I understand many people enjoy gambling. I don't judge people on the activities they engage in. I love playing video games and I'm sure many people consider that a waste of time and money. To each his (or her) own.
Stray Observations About Las Vegas
- Outside of Bourbon Street in New Orleans, I've never seen a place that allowed (and encouraged!) drinking as much as Las Vegas.
- I'm amazed that it's 2017 and casinos still employ scantily clad women as dancers around the gambling tables.
- Casinos are extremely good at getting people to part with their money. It's kind of awesome to watch how well they do this.
- I haven't been around so many smokers in years. I felt like scrubbing my lungs after spending time in the casinos.
Listening / Reading / Watching
Here's what has my attention right now:
- 1984 by George Orwell. Believe it or not, I never got around to reading this classic book. It seems like a good time to do so.