Some, especially younger individuals and those of limited means, seem to think gambling gives them a better chance of success than investing. Perhaps they think the stock market is rigged. Maybe they experience more joy in gambling than investing. Regardless of the reason, I recently read an article and found a few truly astounding facts.
- According to Sportsbook Review, in 2018 Americans placed $6.6 billion in online sports bets. In 2024 it was $130 billion.1
- Researchers at the University of California, San Diego found that of the more than 700,000 gamblers they surveyed, 96% percent lost money to online betting. Just 4% turned a profit.1
- According to the study, while allhouseholds that engaged in online sports betting saw a decrease in investments of 14%, low-savings households saw a decrease of 41% in investments. The research claims that “[t]hese households, already in relatively bad financial shape, are more likely to divert funds from their investment portfolios to betting activity,” ultimately exacerbating their hardships.1
Why would they gamble instead of invest?
Scott Baker, an associate professor of finance at Northwestern University, believes perceived knowledge may be the key. “Someone who watches a lot of sports might be more inclined to think that they can predict winners better there than they could, for example, on a slot machine. They may fully understand that a slot machine is entirely random, but there is some determinative effect from sports betting making them more likely to gamble,” he says. “A lot of people gamble feeling that way.”1
That’s not how the wealthy act. The top 50% of wealthy Americans own 99% of all stocks; the bottom 50% of American earners hold just 1%, per Federal Reserve data. That hasn’t been a bad way to go. Investing in an S&P 500 index fund, which mirrors the performance of the broad stock market, has produced an average annual return of 10.52% over the past 30 years.1
We believe the numbers are clear. The average gambler 996% of them anyway) loses money and the average investment in the S&P 500 Fund has earned over 10% a year over the past 30 years. Gambling may be fun for some, but the research indicates systematically investing in a diversified portfolio gives you better odds of success in the long run.
Doug Lagerstrom
https://money.com/online-sports-betting-stock-market/