Some people ask is investing in the stock market like gambling in a casino? It's actually a really good question. When you think about it - they do have something in common. In both cases we're placing a bet on the future. But there are very big differences, too.
In a casino, we're playing games of chance. Luck decides the outcome when we bet on what happens in the next moment of a game.
When we invest in the stock market, we're betting that the economy - or a company - will grow and prosper over time. If it does, we want to own a share of that success. When you buy mutual funds in your retirement account, you buy a small share of ownership in many companies. When these companies grow and earn more, the value of their shares goes up. When that happens - we make money. And by diversifying our investment across many companies or mutual funds, we reduce some of the risk of that bet.
There's also the element of time. In the casino, you're betting on the next hand or next pull of the slot machine handle. In your retirement account, you're betting the market will go up over a period of many years or even decades. And history has proven that investors tend to do better when when they have time to ride out the market's inevitable ups and downs.
So, when it comes time to saving for the long run, it's a good idea to invest in the market. And if you're in a casino, have fun, but don't leave your future to a roll of the dice.