The Stock Market Casino

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We are all looking for the best way to provide for our family's future.  Our needs include but are not limited to saving for retirement, our children's higher education, create legacy or generational wealth or to just simply make sure we have something for the next rainy day so to speak.

Most of us begin our savings journey through qualified tax preferred investment accounts such as employer sponsored savings plans like 401K's, SEP-IRA's, SIMPLE IRA's or our own individual IRA's (traditional or Roth).  The custodians and managers for most if not all of these accounts are stock market investment companies.  Naturally, the investment options available to us are limited to equities (stocks), debt instruments (bonds) and in some cases options contracts.

Stocks are the predominate vehicle that we have used to invest our life savings.  Admittedly, looking back over the last century we see that the average stock market return is about 10%.  At a macro level that doesn't sound too bad.

However, looking at the stock market as an investment vehicle at a micro level we see that there are some truth's that don't sound so great.

Stock Market Returns Aren't Linear

The 10% average annual return per year isn't linear - meaning that it isn't achieved as a 10% return each and every year such as 10%, 10%, 10%, 10%, 10% and so on.

Rather, the returns are more like +10%, -15%, -5%, +3%, +17% and so on.  Not even the best financial advisors can reliably predict in advance when the market is going to make a big run or endure a big loss.  They can look at indicators to help make an educated guess of the near-term performance but they all will have up and down years that track with the market (they'll be up in an up market and down with a down market).  Some are up more, some are up less, some are down more and some are down less.  The point is, there is little predictability in the stock market in the near term.  Over time, it may average out to a specific number but how much time do you have?  Do you have a century for it to level out and achieve the 10% average?   Will you be in the middle of a multi-year down cycle when you need to get to your money for retirement or for an unplanned life event?

Must Pick Winners and Losers

As we've seen, while the historical average annual returns for the stock market is 10% per year - it is not 10% each and every year.  Similarly, while that 10% per year includes a lot of stocks - not each and every stock in the market returns 10% each and every year.  Some never return anything and ultimately go out of business.  Some perform astronomically.  Some just hover around within a specific range and some are up and down all the time.

To help mitigate the disparity of returns and to level out the risk and returns, we try to spread our investments across a variety of stocks and industries.  We use things like mutual funds and Exchange Traded Funds (ETF's) to help to provide some balance and minimize risk.

There are also different strategies to help achieve returns.  Some focus on value stocks, some look for dividends, some buy and hold while others day trade.  Regardless of the strategy, you have to pick and choose which stocks you believe will be winners (and avoid the losers).  What's your track record?  What's the track record of your financial advisor?  Logic indicates that its a gamble - maybe you've read a how-to book before going to the casino to play Blackjack so you have some basic knowledge - each and every hand is different and sometimes you win, sometimes you lose.  When you walk away - are you up or down (or do you run out of money before you get a chance to hit a winning streak)?

Events Beyond Our Control

It seems as though about every 7-10 years during my investing lifetime there have been significant and unforeseen world events that have adversely impacted the stock market - and investments.  Some that immediately come to mind

  • Stock market crash of 1987
  • Y2K (2000)
  • 9/11 (2001)
  • Financial system crash and depression of 2008
  • COVID-19 (2020)

Those events are worldwide and each affected the world's economies.

However, even individual stocks experience unpredictable events that can clobber the stock or even kill the entire company.  I'm reminded of a few such as:

  • Leak of nude photo's of the CEO during a divorce (Amazon)
  • Massive accounting fraud scheme (Enron)
  • Major oil spill (BP)
  • Massive fraud (Theranos)
  • Fatal car rollovers (Ford/Firestone)

What if you had a significant portion of your savings invested in one of those stocks or industries?

Advisors Advise On What They Know

Stock brokers and many financial advisors invest a lot of time and money in their chosen profession.  They earn degrees, must earn and maintain licenses, must obey many regulatory requirements,  continue to invest in professional development and stay current on stocks, companies, industries, and a lot more.

Their world is stock market-centric.  That's the world they live in.  There's also a kind of the group think behavior at work.

If the companies they work for are investment or brokerage firms or the investment accounts are managed investment accounts they will naturally (and in some cases can only) recommend and advise clients how to invest in the market using various strategies and leverage sometimes propriety systems and techniques.

When I started to become disillusioned with the stock market for preserving and growing my life savings and asked my advisors for alternatives - they didn't have an answer.  That's just what they do.  If the only tool you have is a hammer, then pretty soon everything starts to look like a nail.

Alternative To The Market

So, if the stock market is just like casino gambling - what else is there?


There are many ways to invest in real estate, including:

  • Single Family
  • Multi Family (Apartments)
  • Mobile Home Parks
  • Office
  • Retail
  • Medical
  • Self Storage
  • more...

I've chosen to focus on multi family real estate which offers a lot of advantages over the stock market casino, such as:

  • Lifetime Cash Flow
  • Someone Else Pays Off the Mortgage
  • Recession Resistant (best performing asset class during the 2008 crash)
  • Values based on Income vs Comps
  • Financial Freedom

Yes, you can invest in multifamily real estate through your qualified retirement accounts.  Transfer your account into a self-directed IRA or solo 401K and the world of investment options opens up.

If you would like to learn more about how to get out of the casino, please contact me - I love sharing my personal "testimony" and what multifamily real estate can help you achieve.