Market Pulse: Is Wall Street like a casino? |

Market Pulse: Is Wall Street like a casino?

David Vomund

There is a price war on Wall Street and that is good news for investors.

Both Schwab and Fidelity only charge $4.95 per trade. Vanguard announced commission-free online transactions for nearly 1,800 ETFs and the ETF providers continue to lower their fees.

When I began my career in the 1980s, trading commissions were in the hundreds of dollars, mutual funds charged outrageous load fees, and prices were calculated in eighths instead of pennies so bid-ask spreads were larger. Compare that to today. Investors can buy Schwab S&P 500 Index Fund (SWPPX) for an annual expense fee of just 0.03 percent and outperform most of the high-priced actively managed funds.

Still, some say Wall Street is rigged and compare stock ownership to a casino. If Wall Street is a casino, it’s one in which the odds heavily favor the players. That’s not a typo. If the “players” are long-term investors success is almost guaranteed. That’s because stocks go up over the long term.

Consider that since 1928 the stock market has risen on 54 percent of the days, 58 percent of the months, and 73 percent of the years. Compare that to a casino, where the longer you play the greater the odds that you will lose. Every stock market “correction” and bear market has been followed by a move to new highs. For 20-year holding periods stock returns have never fallen below inflation. Bonds and gold can’t claim that. Since World War II, the average annual real (after inflation) return on stocks is 6.4 percent.

To stack the odds in your favor one must hold a broad market index and/or high-quality companies that pay dividends and raise them often, if not annually.

If, however, you constantly jump into and out of the market and hold low-quality stocks (or leveraged ETFs) then the casino analogy isn’t far off. As we saw after the technology bubble burst, low-quality stocks sometimes don’t come back or they disappear entirely.

Years ago computers cost thousands of dollars, long-distance phone calls and faxes (remember them?) were billed by the minute and the commission to buy individual stocks depended on their price and the number of shares. Commissions often ran to hundreds of dollars. Stocks were priced in dollars and fractions, not pennies as today. Times have changed, and investors have benefited.

David Vomund is an Incline Village-based fee-only money manager. Information is found at or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.

Support Local Journalism

Support Local Journalism

Readers around the Lake Tahoe Basin and beyond make the Tahoe Tribune's work possible. Your financial contribution supports our efforts to deliver quality, locally relevant journalism.

Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.

Your donation will help us continue to cover COVID-19 and our other vital local news.

Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.

User Legend: iconModerator iconTrusted User


Still no timetable for reopening of US 50


SOUTH LAKE TAHOE, Calif. — Officials said conversations are occurring daily in regards to reopening U.S. Highway 50, but there is still no estimated date as to when traffic may start flowing again.

See more