Isn't investing just gambling?

[Joe]

Certainly investing can be gambling, particularly if you put a lot of money in risky stocks like Facebook. However I try to decrease the gambling aspect as much as possible by spreading my money out over more than 6,000 stocks both domestic and foreign. I buy index funds at Vanguard,com to do this. I invest for the long haul, and there has never been a 20 year period that the stock market has lost money, even after correcting for inflation. Even during the great Depression, if you held for 14.5 years, you got your money back, provided you were properly diversified.

However most of the time stocks go up. They have averaged about 10% a year for the last 210 years. If you correct for inflation, the average return is about 7%. The odds are heavily in your favor if you hold out for the long term.

Of course, maybe sometime in the future, there may be a 20 year period where stocks lose money. There also maybe runaway inflation, and the money you save up in a "safe" bank account may be wiped out. Even if you are a scared of stocks, I think it is reasonable to consider putting 10%-20% of your money in an IRA at Vanguard invested in the Total Stock Market Index Fund. It is likely to be worth a whole lot more when you retire.

I may point out that many things in life are a gamble. For instance, you borrow money for college, gambling that you will make enough when you graduate to pay off the loans. This is a gamble that pays off most of the time. Similarly the stock market is a gamble that pays off most of the time, provided you are diversified and investing long term.