As a financial adviser I continually like to remind investors that there’s no such thing as a sure thing. You can look to the past to see how an investment has performed, but as the cautionary disclaimer often warns, past performance is no guarantee of future results.
Over the years, we’ve heard many fallacies about sure things. In the
investment world, some recent examples of certainty claims that didn’t
quite pan out are: real estate can only go up in value; day trading tech
stocks will make you so much money you’ll be able to buy your own
private island; gold can only skyrocket in value; and most recently, oil
can only increase in value.
At one time or another, most of us have seen commercials implying the
above statements are fact. They are not. Just as it is with life in
general, there are definitely no sure things in the world of
Locally, we recently witnessed the near impossible. A couple of weeks
ago Michigan State made an unbelievable comeback against Michigan in
the last 10 seconds of the game. According to the statistical firm
Massey-Peabody Analytics, the probability of Michigan State winning the
game was .02 percent.
Said another way, the likelihood of Michigan winning with only 10
seconds remaining was 99.98 percent. But whether you’re a Wolverine or
Spartan fan, you are now certainly aware that more than a 99 percent
probability does not mean 100 percent certainty.
That being said, regular readers of this column know that I’m a
strong proponent of using math and statistics to enhance your investment
Statistically, would you rather have a high probability for achieving
your financial goals, or hope to reach those same goals by hoping for a
statistically improbable event to occur?
The practice of making consistent contributions into your retirement
plan is a good example of improving your probability for a successful
retirement. For example, by saving $500 every pay period and taking
advantage of compound interest, you can amass a sizeable retirement nest
egg over a 30-year work career.
Statistically speaking, I’m pretty confident that the person in the
example above will have a much, much larger retirement nest egg than
someone that gambles $500 at the local casino every pay period for 30
One of the things that concerns me is that far too many people are
counting on a miracle win for a successful retirement. Don’t be swayed
by the Spartans near impossible victory. The actual statistics for
anyone getting a financial windfall are nearly impossible to determine.
And yet too many still reach for the highly improbable by purchasing
lottery tickets or squandering paychecks at the casino.
In other words, gaming is well beyond entertainment for some. They’re
grasping for a nearly impossible result in order to achieve their
What we all saw on the football field in Ann Arbor was about as
improbable as you’ll ever see in sports. True, there are no real
guarantees in the world of investing either. But rather than hoping or
gambling on the near impossible, it’s wiser to put statistics in your
It may not always work out as planned, but the alternative of
counting on a near miracle is no way to achieve your financial dreams.