There are 2 truths to the world of business that you must always keep in mind when understanding the world and how everything will impact your money:
1. Corporations and businesses exist for one reason: To maximize shareholder value.
2. Investors (shareholders-you and I) invest for one reason: To get the maximum return on our investment.
These two simple truths are the core foundation for capitalism. Remember these two pillars when looking at the world around you. What you invest in has a direct impact on the rest of the world, because without your backing, many companies would not exist.
According to Dictionary.com gambling is "to stake or risk money, or anything of value, on the outcome of something involving chance."
So…Are you a gambler who believes she is an investor?
Typically, mutual funds are used to "diversify" your portfolio into a broad range of stocks and bonds so that you are "safe" from market turmoil. But are you really safe?
The Wall Street Journal June 14-15, 2008 issue had an article titled "How to Bulletproof Your Nest Egg." The article states:
"Increasingly, financial planners and researchers are warning clients that the timing of retirement-in other words, the luck of the draw-will largely determine how a nest egg will fare in the future. If you’re fortunate enough to retire at the beginning of a strong bull market…your savings might easily last for three decades. If you’re unlucky enough to retire at the start of a bear market…you could find yourself struggling financially for years to come."
Do you want to gamble on your lifestyle in the future? Neither do I.
The goal of building wealth is to be in control, not out of control.
As an average investor, you are gambling that the Fund Manager does a good job and your portfolio fares well over the life of your investments. Does that make you feel like your mutual funds (yes, this includes 401(k)’s and IRA’s) are a good primary source of wealth building?
Buy, Hold, and Pray is a losing strategy. "Your portfolio will bounce back… You just have to give it time… It always comes back…" Sound familiar? These are the justifications given for cruddy returns while others in the marketplace are dancing around you making a fortune buying and selling for optimum profits.
Instead, diversify yourself across a different spectrum of investments so that you sleep better and grow your wealth over time:
1) Paper Assets: own some stocks, bonds, or mutual funds as a "security" blanket, but make sure you are in control of them, and can sell the losers so that they don’t drag down your portfolio
2) Businesses: own businesses, in whole or in part
3) Real Estate: own cash-flowing real estate
I realize this isn’t easy…but it sure beats the buy, hold, and pray strategy. Build it slowly over time: investing isn’t meant to be glamorous or exciting (unless day trading is your cup of tea 
).
In closing, don’t be a gambler…the odds are always in the house’s favor.
