I've gambled a few times in my life. In fact, gambling helped pay for the beginning of my career in financial services.
Years ago, I was playing bingo and decided to put a little extra money on the "hot ball." As luck would have it, I got bingo on that number and walked away with about $1,600. Those winnings paid for my first suit for job interviews and helped cover the fees for my securities licenses.
Not a bad return on a bingo card.
Another memorable experience came the night before my wedding. A couple of friends and I visited a casino in St. Louis – where I was living at the time - and I won about $150 playing blackjack. The next morning, I discovered that my soon-to-be wife, Michelle, had helped herself to $75 of my winnings.
I hadn't even said "I do," and I was already learning about joint assets.
I share these stories because I'm not against gambling. I've done it, and I've enjoyed it. But I was spending money on entertainment and happened to get lucky. That wasn't a financial plan.
Lately, it seems like you can place a bet on just about anything. It's gotten me thinking about something that comes up often in my work. It's worth thinking about what might happen. I just don't want a financial plan that only works if we guess right.
That matters when you're getting ready to retire, even if you've never placed a bet. It's easy to feel like you need to know what the market or the economy will do next before you can make a decision. A big part of my job is helping people plan for retirement without needing to get those predictions right.
When Everything Has Odds
I've always enjoyed sports, particularly basketball. They give us something to cheer for, argue about, and occasionally agonize over. But when every play becomes another chance to place a bet, watching the game becomes something else. We're not just rooting for our team anymore. We need a particular thing to happen because we've put money on it.
And it's not just sports. I've had clients ask about prediction markets, where people can wager on things like an election, a Federal Reserve decision, or an economic announcement. When you see odds attached to one of those events, it's tempting to think they tell you what's going to happen.
I can understand why people pay attention. Those markets can bring together useful information, and people may give their opinions more thought when their own money is on the line. But there's a difference between saying something is likely and knowing it will happen. Even with good information, we can still be surprised.
Just Ask a Cavaliers Fan
As a Cleveland Cavaliers fan, I got a painful reminder of that during Game 1 of the Eastern Conference Finals against the New York Knicks. The Cavs were up 93–71 with less than eight minutes left. According to ESPN Analytics, Cleveland had a 99.9% chance of winning.
The Knicks came roaring back, forced overtime, and won 115–104. I suspect most Cavaliers fans would prefer that I never mention this game again.
That doesn't necessarily mean ESPN got the odds wrong. A long shot can still happen. And while ESPN's model isn't the same as a prediction market, neither can tell us for certain how things will turn out.
A probability is not a promise. It's useful information, but the game still has to be played.
The Trouble With Needing to Be Right
You don't have to place a bet to feel like you need to know what's coming. Maybe you're waiting for the economy to settle down before retiring. Or you feel like you need to know where the market is headed before making your next financial decision.
I get it. Retirement is a big step. Of course you'd like a clearer picture before making it. But there's always going to be another question about the economy or the markets. We can learn more and think things through without ever reaching a point where we know exactly what's coming.
So I think there's a better question to ask. Instead of stopping at, "What do I think will happen?" I want to know, "What happens to the plan if I'm wrong?" That gets us talking about the risk we're taking, not just how confident we feel.
That doesn't mean we ignore the economy or stop having opinions. A forecast can help us think through a decision. We just need to leave room for things to turn out differently.
Investing Is Something Different
Investing and gambling do have some things in common. Both involve risk, and neither guarantees success. But when I invest in a diversified stock portfolio, I'm buying small pieces of businesses. They have employees, customers, products, and services. They're working to earn profits and build value over time.
That's different from betting on a single event. Still, calling something an investment doesn't make it safe, and we can get caught up in trying to pick the next winner there, too. What matters isn't just what we own. It's whether we're counting on being right about what happens next.
I don't need to know where the stock market will finish the year to make thoughtful long-term decisions. And I don't want a client's retirement to depend on correctly guessing the Federal Reserve's next move. I'd rather plan for several ways things could turn out than count on just one.
For someone nearing retirement, that might mean asking, "If the market drops early in retirement, how would that affect my spending?" That's a more useful conversation than trying to guess when the next downturn will happen. We can focus on spending, diversification, and how much risk we're taking. None of that removes uncertainty or prevents losses, but it gives us more to work with than hoping we guessed right.
That may not be as exciting as picking a winner. But I've never thought investing needed to be exciting. I want us to make thoughtful decisions and stick with a disciplined approach, even when the markets make that difficult.
Preparing Instead of Predicting
I sometimes think back to that $1,600 bingo win. I got lucky, and I'm grateful for what that money helped me do. But I wouldn't suggest that anyone start a career or prepare for retirement by hoping for a lucky bingo card.
The winnings helped get me started. The next two decades had a lot more to do with work, patience, and thoughtful decisions than luck.
My job isn't to convince you that I know what's coming. It's to help you think through your decisions when neither of us knows. If you're getting ready to retire, I think that's more helpful than offering you another prediction.
I'd rather spend my time preparing for a future I can't predict than betting money on one I think I can.
