PSA: Investing Your Money Is Not the Same as Gambling


PSA: Investing Your Money Is Not the Same as Gambling

Investing in the stock market isn’t completely foolproof. A certain amount of risk is involved, and this leads some people to compare investing to gambling or playing the lottery. But this is a weak, if not completely inaccurate, comparison that prevents a lot of people from building wealth. Here’s how.

I recently talked about this comparison in a conversation with Laurie Itkin, financial advisor and author. She mentioned that the comparison doesn’t make sense for many reasons, but mainly because of the odds. When you invest properly, and follow some basic rules, the odds are highly in your favor. But that’s not the case with gambling. I asked Itkin to elaborate:

Let’s say you spend $ 5 a week on lottery tickets for 20 years. That’s $ 260 a year or $ 5,200 after 20 years. Will you hit the lottery? Perhaps, but your odds of winning are extremely low. The U.S. stock market on average returns about 8% a year. During the past three years it has done much better but there have been a couple of years where it’s done much worse, such as in 2008. But the longer the time horizon, the higher the probability that you will recognize average annual returns of 8%.

If you’re still skeptical, consider the ratio of people who have built their wealth with the help of investing to those who have built their wealth via lottery scratchers.

This isn’t to say there’s absolutely no risk involved with investing. And that risk, despite the explanation and the odds, might be too much for some. Maybe you don’t want to be at the mercy of the market. But, keep in mind, you’re still at the mercy of inflation. Without investing, that could end up costing you.

Need even more convincing? Check out this lengthy argument from InvestorGuide.

Photo by Lisa Brewster.

Two Cents is a new blog from Lifehacker all about personal finance. Follow us on Twitter here.



Stop Gambling With Customer Retention [Infographic]


Companies that increase customer retention rates by 5% can increase profits by as much as 95% according to the following Sparked infographic.

Despite that fact, however, most companies don’t focus on retention, instead relying on chance to keep their customers.

Businesses may be ignoring customer-retention efforts because of various fallacies—for example, that one or two poor experiences or episodes cause churn. “Churn more often results from a series of episodes over time,” states Sparked. “Focus on the entire journey, the overall experience.”

Another fallacy is that satisfying customers is good enough. Satisfied customers, however, are not necessarily passionate or loyal customers: “Earn customers’ active advocacy by delighting them at key moments,” suggests Sparked.

To find out more about customer retention fallacies, realities, and remedies, check out the infographic:

Veronica Maria Jarski is the Opinions editor and a senior writer at MarketingProfs.

Twitter: @Veronica_Jarski

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