This year has surely tested investors’ resolve. The war in Ukraine continues, tensions between Israel and Iran have escalated and fears of a self-inflicted recession in the U.S. have weighed heavily on investor sentiment.

Many have pondered whether US exceptionalism is ending, with a growing budget deficit that continues to drive debt-to-GDP even higher – a concern that hasn’t subsided with President Trump’s so-called “big, beautiful Bill”.

And, of course, tariffs, which after a 90-day pause are now back in the headlines and contributing to investor uncertainty.

Despite all this, global share markets remain remarkably resilient – hovering at, or near all-time highs. Investor optimism has been fuelled by fiscal stimulus in Europe (mainly Germany) and the unstoppable rise of artificial intelligence, which just saw Nvidia become the first company to be valued at US$4 trillion.

With a constant barrage of headlines and a wall of worry to climb, investing in the share market can feel a bit like a gamble, even as equity markets sit near all-time highs. Much like a roulette wheel – black you win, red you lose. But is this really the case?

Is the share market a casino?

While it’s tempting to see markets as games of chance, the evidence tells a very different story. Unlike the casino, where there is only one winner, the share market is not a zero-sum game.

History suggests that patient, long-term investors – rather than lucky punters – stand to win, as share markets tend to rise over time.

The house always wins

Casino games are typically win or lose affairs, with the probabilities skewed in favour of the house. That’s why they say, “the house always wins”.

Take roulette, for example. The wheel, in most instances, has 38 numbers: 1 to 36 in either red or black, plus 0 and 00 in green. The dealer spins the wheel and the ball falls on one of the numbers. The simplest bet is on whether the ball will fall on a red or black number, which has odds of just over 47%. If you put $5 on red, and the ball lands on black or green, you lose your entire $5.

The win-win game

In contrast, for patient investors, the share market tends to be a win-win game. History has shown that share markets have risen over time. $100 invested in the US S&P500 at the beginning of this century – just before the Dotcom bust – would now be worth around $580, despite the global financial crisis and the Covid pandemic.

Data from J.P. Morgan Asset Management underscores the power of a long-term mindset. The worst drop in the US S&P500 stock market index over any year since 1950 is –37%. Yet for those who stay invested, the lowest annualised return over any 20-year rolling period since then was still +6% a year.

All about the long-term

Investors should avoid treating the share market like a casino. Shifting away from long-term investing into short-term speculation - based on what might happen in the next week, month, or even year-pushes investors closer to gambling. Even if an investor could accurately predict an event, they would still need to anticipate how other investors might react.

Sometimes bad news is already priced in, causing markets to rise rather than fall. Then comes the challenge of timing both entries and exits to maximise returns. That is four critical decisions to consistently get right – before accounting for unpredictable shocks like COVID – making sustained success with this strategy an almost impossible feat.

Click to trade, easy to gamble

As it has become easier to trade shares in companies, more people are approaching investing with a short-term mindset, blurring the lines between stock market investing and gambling. In the 1950s, the average holding period for US shares was around eight years. By the 1980s, that fell to two to three years. Today, the average holding period for retail investors is just six months or even less.

It can be hard to sit on your hands and do nothing during volatile times, even though history shows that this is often the most effective approach. But please, don’t just take my word for it. Listen to Warren Buffett, recently retired, and arguably the greatest investor of all time. “If you own your stocks as an investment – just like you’d own an apartment, house or a farm – look at them as a business,” he says. “If you’re going to try to buy and sell them based on news or something your neighbour tells you, you’re not going to do well. Find a good bunch of businesses and hold them.”

Long-term investing is just the opposite of gambling. May the odds be ever in your favour.

An amended version of this article was originally published in the NZ Herald on 15 July 2025 (paywalled). 

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