It Is A Daily Grind – You Need Perseverance To Get Ahead With Your Investments

by Hank Coleman

This is the second in a seven part Las Vegas themed series, “What Las Vegas Can Teach You About Your Personal Finances”. In case you did not know, this week’s posts are brought to you directly from Las Vegas, Nevada where I am, like everyone else who comes to the glittering city in the desert, currently on a mission to maximize my investment and minimize my losses on the felt.

Winning at blackjack or any other casino game is a grind. It takes perseverance to not get discouraged and give up. The house edge on blackjack is approximately 1% depending on the casino’s various rules, 5% for roulette, and 2%-15% for slots. Many slots and video poker machines have a payout ratio of 90%. So, if you bet $100, over the long term, you can expect to earn $90 of your money back. The $10 that is missing is the casino’s profit. Some days you will do better and most other days you won’t. But, if you play the game long and consistent enough, you can expect that 90% payout.

The key to the equation is the phrase, “over the long term”. Over a long period of time, the law of large numbers evens everything out. Like when flipping a coin, there can be several flips in a row that will consistently land on heads despite our knowledge that the odds are only 50/50 each time. And, over a long time period, 50% of the coin flips will be heads and 50% of the flips will be tails. The same can be said for investing. Over the long term, the market has historically returned approximately an average of 8% annual return to investors. Of course, like gambling, there will be up days, down days, years where the market rises, and years where it falls. There may be incredibly long periods of rises in the market and likewise downfalls. There may be years where the stock market does nothing but take your money away (can we say 2008?). But, throughout the history of our stock market, there have been twice as many up years as down. The key to investing is to keep plugging along. Do not watch the stock market as hard as that might be. Keep dollar cost averaging through up and down markets alike. Consistency is the key to getting ahead in investing.

This is the second  post of a seven part series of what Las Vegas can teach us all about personal finance. Check out the others in the series below…

Just to be clear….in no way am I advocating gambling. If you think that you may have a gambling problem, you should find help as soon as you can. There is help available. You can find help and resources at the Gambler’s Anonymous website, the National Council on Problem Gambling, and the National Center of Responsible Gaming.

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{ 1 comment… read it below or add one }

Vinc April 7, 2010 at 3:55 am

Everything is a casino:
1. The stock / equity market
2. The property market
3. The 4D, the 7D, the TOTO
4. The horse racing
5. Etc…..What is not?
The simple rule to investment : contentment?

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