Over my 20 year career in human resources, I have tirelessly promoted my employer’s 401k plan as a valuable employee benefit. Unfortunately, many employees refuse to participate. When asked, these employees confess that that they consider investing in the stock market akin to gambling. They hear news reports of spectacular gains in a stock or the overall stock market and then, a few short weeks or months later, they hear the new report just as spectacular losses. To them, these reports paint a picture of market increases, then decrease, then increase again in what appears to be an unpredictable, random pattern.Some of these employees are actual gamblers, spending time at the local Indian casinos or weekend trips to Las Vegas. These employees know what gambling is. Many others are not hard core gamblers, but nonetheless still consider investing in stocks risky business. The effect is that many of my co-workers refuse to participate in our 401(k) plan – even given the favorable tax treatment and a company matching contribution. Others have confessed to me that they don’t defer any money into their 401(k) account that they cannot afford to lose.I understand their conclusion. I am not a market “timer.” I agree that predicting what will happen with the value of stocks in the next 3 to 6 months is impossible. However, I do know history. That knowledge has given me a high level of confidence that, given enough time, I fully expect my stock based mutual funds in my 401(k) plan to be worth more – substantially more when I retire. Buying shares in a well run stock based mutual fund then, isn’t gambling. That is investing. Even though the value of the stock market may drop in the short term, the overall trend has been up. I count on that continuing.For example, consider how difficult it is to find any ten year period where stocks did not increase in value. I can quote statistics, but instead of telling you – I recommend that you go and look for yourself. Simply do a quick internet search for stock market performance charts. After you have considered ten year investment periods, try to find any twenty year periods where stocks have failed to increase in value. You can’t.Investors, especially investors in 401(k) accounts who have years to go before retiring should consider this before ignoring their 401(k) plan. Putting money in a well managed stock based mutual fund in an employer sponsored 401(k) plan is about as close to a “sure thing” that one can get – provided that history keeps repeating itself and there is enough time for that investment to grow.However, you can’t just invest and forget. You need to make sure your 401(k) plan is reasonably acceptable (low or no fees, company matching contributions, acceptable mutual fund offerings, etc). Although there are some truly horrific 401(k) plans out there chances are, the plan your employer provides you can be used to build retirement wealth for you if you use that plan appropriately.You also need to keep an eye on the actual stock based mutual funds you invest in just in case there are significant changes in the mutual fund’s portfolio, the management or the mutual fund’s performance relative to the overall market. Above all, you need to make sure that you can allow time to work on your behalf. Unless history stops repeating itself you will prosper.I attribute my own investment success, especially my success at investing in my 401(k) account to learning how to invest in well run mutual funds and giving those skilled managers time to create wealth for me. That’s not gambling. That’s investing!Copyright © 2009 by Jeff Brownlee

The example of Blaise Pascal, the famous French mathematician of 17th century, proves that gambling might be not so much a purpose as means. It can be an excellent exercise for mind, as in case with Pascal and another French mathematician – Fermat, who invented calculations, now known to us as theory of probabilities.”Theory of probabilities was created when Pascal and Fermat started playing gambling games”, stated one of their contemporaries.These two scientists did sums on theory of probabilities by correspondence and the relevant material was obtained during their visits to the gambling house at leisure. Later this correspondence resulted in Pascal’s treatise, “completely new composition on accidental combinations which govern the gambling games”.In his work Pascal almost completely casts out phantoms of luck and chance from gambling games, substituting them with cold statistic calculations based on the arithmetic mind. It’s difficult for us to imagine what riot the invention made among the gamblers. We treat theory of probabilities as something trivial, though only specialists are sound on its details, but everyone understands its main principle. But in the times of the French mathematician, the minds of all gamblers were absorbed with such notions as “divine intent”, “lap of Fortune” and other things that only enhance the obsession by the game adding extra mystical tones to the games. Pascal without any hesitation opposes his thesis to such attitude to the game “Fluctuations of happiness and luck subordinate to considerations based on fairness and which aim irrevocably to give every player what actually is owing to him”.In Pascal’s hands mathematics became fabulous art of foreseeing. It is more than just amazing that unlike Galileo, the French scientist did not make numerous tiring experiments on multiple throwing dice that tool a great deal of time. In Pascal’s opinion, the unique feature of the art of mathematic consideration compared to the common statistics is that it obtains its results not from the experiments but is based on “mind foreseeing”, i.e. on intellectual definitions. As a result “preciseness of mathematics is combined with uncertainty of chance. Our method borrows its awkward name – “mathematics of chance” from this ambiguity”. Another curious name followed Pascal’s invention – “method of mathematical expectation”.Staked money, wrote Pascal, no more belonged to gamester. However, losing nth sum of money, players also gain something in return, though most of them do not even guess it. In fact, it is something absolutely virtual, you cannot touch it neither put into your pocket and to notice it – the gambler should possess certain intellectual ability. We are talking about the acquired “right to expect regular gain a chance can give according to the initial terms – stakes”.Somebody will say that it is not so encouraging. However seeming dryness of this formulation ceases when you just pay your attention to word combination “regular gain”. Expectation of gain turns out to be quite justified and fair. It’s another matter that a more hot-tempered person is more likely to pay his attention to the word “chance” and “can give” (and consequently it might also be otherwise).Using his method of “mathematical expectation”, the French scientist thoroughly calculates particular values of “right for gain” depending on different initial terms. Thus a completely new definition of right appears in mathematics which differs from the similar definitions of law or ethics.”Pascal’s triangle” or where theory of probabilities fails.
Pascal summed up the results of these experiments in the form of the so-called arithmetic triangle consisting of numerical numbers. If you can apply it, you can precisely foresee probability of different gains.For common people “Pascal’s triangle” looked more like magic tables of kabbalists or like a mystic Buddhist mandala. Failure to understand the invention by the illiterate public in 17th century touched the rumour that “Pascal’s triangle” helped to forecast world catastrophes and natural disasters of the remote future. Indeed presentations of theory of probabilities in the form of graphic tables or figures and moreover proved by the real game caused almost religious sensations in uneducated gamblers.Though we should not mix theory of probabilities with what it is not by its definition. “Pascal’s triangle” fails to foresee the future deal in one particular case. Eyeless destiny governs such things- and Pascal never debated it. Theory of probabilities becomes useful and can be applied only in relation to the long series of chances. Only in this case, number probabilities, series and progressions, constant and known in advance can influence the decision of a clever gambler in favor of a particular stake (card, lead, etc.)Pascal’s invention is even more amazing if to take into account that its famous triangle was known to Muslim mathematician of certain religious orders many centuries ago. It is absolutely true that European Pascal could not obtain this information from anywhere.All this once again proves that mathematical patterns of any process are the same regardless of time and space and whims of the so called Fortune. Awareness of this fact enraptured by Pythagoreans, philosophers who deeply and emotionally perceived it at that time.One to thirty-five.
Pascal more and more often faced similar complications connected with the game that caused controversies in gambling houses and aristocratic mansions in France of that time. Among them there was a problem proposed to young Blaise by one of his aristocratic friends.The problem concerned dice. It was desired to find how many series of throws is theoretically necessary so that the chances to win (two sixs) will dominate the probability of all other outcomes taken together. All this is not so difficult as a beginner may presume. It is easy to notice that in the game with two bones there are only 36 combinations of numbers and only one gives double six. After such explanation it is clear for any sensible person that with one-time throw there is only one chance to thirty-five to win.The result of these simple calculations can cast down many fans of dice, but on the other hand, the rapture of those lucky ones throwing double six is staggering. Because they know the exact devil number of opposite outcomes that opposed their luck!