Investing in Roulette

What would be your reaction if I said I was going to Las Vegas to invest in a few hands of blackjack, some spins of the roulette wheel or rolls of the dice? You would probably laugh. It is very clear that the verb “invest” does not fit when describing gambling activities. More appropriate verbs for gambling activities would be “gamble”, “bet”, “play”, “speculate” and “lose my shirt”.

Unfortunately such misuse of verbs is not so clear when it comes to the activity of investing.

The Media Skews Our Perception

The media skews our perception in many ways, but one way you may not realize is how they describe investing activities. They seldom us the verb “invest”, instead they use words such as “bet” and “play”. Try it out for yourself. Do a search for “investors invest” and “investors bet”. How many hits do you get for each one?

Media articles and headlines are written by journalists and editors. These are individuals that typically have degrees in journalism and/or English. In other words, they are masters of word selection and the English language. So why do they choose to use “bet” over “invest” for investment activities? Why do they choose to use verbs meant for gambling when describing the act of investing?

A recent article by Jason Zweig in the WSJ highlighted the differences between a speculator and an investor. I have been speaking and writing on the speculator/investor topic for close to a decade. Zweig mentions that financial journalists have been calling market speculators “investors” since the beginning of time. He “can’t stand it anymore”. He has mentioned it many times to editors and they have ignored his pleas and continue to use poor word choice.

Words Matter

We may not be able to answer why the media chooses to misrepresent the act of investing, but we can answer a more important question. How does this impact the investor? It impacts the investor greatly.

Words matter a lot in our language. The more we hear something, the more we take that on as a correct perception or truth. This is known as the availability bias. As investors read and hear ad infinitum that “investors bet”, it unconsciously signals to the brain that it is OK for investors to bet; that’s what they do. Therefore investors, without knowing it, may begin to act like gamblers. Eventually they may see their folly, but that usually happens after they have been humbled by losing a significant amount of money.

Call a Spade a Spade

One of the primary values of an advisor is to employ accurate word choice and correct the many investor misperceptions that are out there. I have said before and will say again, the financial media is our #1 enemy. They are all about getting investors pumped up emotionally so they will tune in – they couldn’t care less about how your client performs. So long as they tune in today and come back tomorrow. And they purposely use incorrect word selection to program investor’s minds in ways that may be temporarily exciting, but are often financially destructive.

If you are not proactively playing hardball with consistent messaging, you are doing a disservice to your client. And this messaging is not the marketing libraries you have access to – most of those articles are nothing more than noise. Attractively produced, but noise nonetheless. You need targeted and timely messaging if you really want to be effective in helping your clients filter the noise and focus on the signal.

If you’d like to have a discussion about messaging, email me and we can set up a call.