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Is Investing Gambling?

jacobted blog, Investment Management Leave a Comment

As someone who has worked on Wall Street for 30+ years, the answer for individual investors is yes.

The individual investor is at an informational disadvantage. There is a reason Wall Street and successful fund managers have technology and data budgets in the tens of millions of dollars and pay their portfolio managers, security analysts, and programmers hundreds of thousands of dollars each year. The gargantuan amount of information available through exchange tick data, news sources, social media, access to senior management, and financial statements is critical to making successful investment decisions. Professional investors using state of the art technology are interpreting and acting on the information virtually in real-time, long before the individual investor even receives the information, let alone processes it.

Comparing investing to a casino, where the house has the odds in their favor is not the correct analogy. The appropriate analogy is you playing blackjack against a player who sees every card in the deck. You (individual investor) may make the correct decision based on incomplete information, but the other player (professional investor) because he knows more than you will always make the best decisions.

As a financial advisor, I see no reason to compete with the professional investor. The best thing I can do for my clients is to place their monies with a proven professional.

These are the opinions of Michael Lewis, CFA MBA and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Diversification and asset allocation strategies do not assure profit or protect against loss. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principal.

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