Why the Stock Market Is the Best Casino in the World

In this episode of Motley Fool Money, Motley Fool Personal Finance Expert Robert Brokamp speaks with Ben Carlson, director of Institutional Asset Management at Ritholtz Wealth Management, writer behind the “A Wealth of Common Sense” blog, co-host of the Animal Spirits podcast, and author of “Risk and Reward: How to Handle Market Volatility and Build Long-Term Wealth,” which will be available on May 12.

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A full transcript is below.

This podcast was recorded on April 18, 2026.

Ben Carlson: I decided to use this parable of the guy who is the world’s worst market timer, and I said, what if he only bought before 50% crash in the 1970s, the 1987 crash, and right before the dotcom bubble blew up, and right before the great financial crisis. He only bought then, and he said in cash between then, but he held onto his shares. How would he have done?

Robert Brokamp: That was Ben Carlson of Ritholtz Wealth Management and the author of the upcoming book “Risk and Reward: How to Handle Market Volatility and Build Long-Term Wealth.” I’m Robert Brokamp. Today is part one of my conversation with Ben about what we can learn from the Great Depression in Japan, how even the worst periods for investors eventually turn out fine over the long term, and how diversification can help. We at The Motley Fool believe that investing in the stock market is the best path to long-term wealth. But it isn’t always easy to stick with stocks. Here to talk about how to manage and stomach all the risks so you can reap the rewards is Ben Carlson. Ben is the director of Institutional Asset Management at Ritholtz Wealth Management, the writer behind the Wealth of Common Sense blog, the co-host of the Animal Spirits podcast, and the author of five books, including his latest, “Risk and Reward,” which will be available on May 12. Ben, welcome to Motley Fool Money.

Ben Carlson: Great. Thanks for having me.

Robert Brokamp: It seems to me that one of the main goals of your book is to convince people that they should invest the stocks. But for that to work out, they have to hold on through thick and thin. The evidence is clear. U.S. stock market always recovers from previous downturns, reaches all-time highs. But people still need the reassurance. Especially during the tough times, sometimes even I feel like I need the reassurance, especially as I’m getting older, getting closer to retirement. Why do you think people need that constant reminder? Do you think it’s mostly a irrational fear? Or is it more one of those behavioral quirks from when we humans were hunters and gatherers being chased around by lions, and it doesn’t make as much sense nowadays.

Ben Carlson: That’s part of it. It’s funny. I did the audiobook for this one for my first time. My publishers asked, “Hey, do you want someone else to read it, or do you want to do it yourself?” I said, “I’ll let someone else read it.” Then I thought, wait a minute. I do the podcast. Now, I can try this myself. I’m not an orator. I’m not really great at these things. I don’t like the sound of my own voice, but I’m going to give it a try. I’ve got this other person in my ear who’s telling me, hey, slow down, speed up, do that word again, try this sentence again. It was an interesting experience. The gentleman who was working with me on the other end, he said, “Listen, I work for publisher, but I’m not in the markets at all.” He said, “Your book is terrifying me. Everything is making me very anxious.” Hearing all these bad things that can happen, this is scary stuff. Just listening to you talk about is making me anxious, but I appreciate you, providing either side.

I think it’s something that I try to get this point across, is that human emotions are not good or bad. It’s what we are. We can’t really help it. I always say that human nature is like the one constant across all market cycles. It doesn’t matter how experienced you are with this stuff. You’re still going to get those feelings, and that’s what I try to convey here is just point out that, these things can and will happen, and you have to somehow build them in their plan, just not hope them away that they won’t happen at some point. I think the big thing is just to provide context around people and show that, yes, I still believe long-term investing in the stock market is your best builder of wealth over the long term because like you said, but you have to get used to these bad things happening along the way, too.

Robert Brokamp: Yeah, but for what it’s worth, I saw it as the complete opposite. I saw the book as very optimistic, very realistic about what could happen, but investing in the stock market is the way to go. I do think that part of the reason, too, is that it’s pretty easy for people to look at situations going on and saying, you know what? This time, it’s different. During the dotcom crash, we had valuations at the highest point ever, even higher than before the Great Depression. During the great financial crisis, we had the first nationwide crash in home prices, old banks like Lehman Brothers going out of business, the pandemic, the worldwide economy goes on pause. We’re sanitizing our groceries before we bring them into the house. Then today, we have AI, where we’re worried about millions of people losing their jobs and businesses going out of business. Of course, I’m sure many of us have heard the classic John Templeton quote: “The four most dangerous words in investing is ‘this time, it’s different.’” But it’s still hard not to feel that way, especially when sometimes things are different.

Ben Carlson: It’s funny. Templeton, actually, in an interview before he passed away, said, “Actually, 20% of the time, things really are different.” But your whole point about me being an optimistic person, I’ve always just been a glass-half-full person, but it felt like everyone’s sentiment after the great financial crisis was really beaten down. I had just started my career. I was, I don’t know, five years into my career in the markets when the great financial crisis happened and seeing the aftermath of that. I saw all these professional investors that I was working with completely, like you said, this time really is different. What if the stock market doesn’t come back? Returns are awful from here, and we were living in the new normal, and that’s the market that I grew up in and the environment, and the sentiment was really beaten down. Everyone was just predicting the next nasty thing to happen, the double-dip recession, and we’re never going to come back. Greece is going to take the world down. Remember the Cyprus banking credit and all this stuff.

I thought, well, geez, I don’t know. The stock market just fell 60%. History tells me that’s a pretty good time to buy. I never would have expected we’re going to have, hey, a 17-year bull market or something coming off of that. But my point was, if you really think that this whole thing is going to go under and not going to come back, then what’s the point of investing in the first place? I’ve always had that more optimistic long-term view, but you’re right, you have to be realistic, too, and understand that the bad stuff comes with a good, and it’s like two steps forward, one step back when you’re investing in the market.

Robert Brokamp: Another point, of course, is that we all hate to see our net worths go down. You mentioned loss aversion in the book, which is that concept from behavioral finance, which posits that losses hurt twice as more than gains feel good. But you also illustrate that you could be a pretty lousy investor and things could turn out all right. Let’s turn to a Ben Carlson classic and hear the story of Bob, the World’s Worst Market Timer.

Ben Carlson: Which was the inspiration for the book. Again, this came out of the great financial crisis, and people worried. It was funny because in 2013 after 4 or 5 years, we finally hit new all-time highs again coming out of the great financial crisis. It was like October 2007, and 2013, we finally hit it again. At that point, people go, we’ve seen all-time highs before. Guess what happens? It leads to a cliff. I wanted to see like fine. Let’s play the devil’s advocate. Say you are investing right before a calamity. You invest right before the peak.

I decided to use this parable of the guy who is the world’s worst market timer. I said, what if he only bought before 50% crash in the 1970s, the 1987 crash, and right before the dotcom bubble blew up and right before the great financial crisis. He only bought then, and he sat in cash between then. But he held onto his shares. How would he have done? If he only bought at the peaks, he got crushed right afterwards, but he held on over the long term. Over 40 years of investing, how did he do? The numbers were shocking, and I didn’t even know what they look like before I ran them. I did this back in 2014, and I tell people this it’s crazy. I look at my stats from my blog every once in a while. Every year, it’s still my most read post. People still read it to this day, more than 10 years later. It’s funny that whole concept really resonated with people like, my gosh, so you can actually make mistakes, but as long as you extend your time horizon and you keep saving and you keep investing and you don’t get scared out of the market. That was the whole point. Don’t get scared out. You can actually still have pretty good results. People like that.

But the other one was, again, the whole point of this book was, fine, that was in the U.S. What about elsewhere? What if you were in Japan? What if this? I get a lot of what ifs from people. What about this scenario? What about lost decades and this? That was the whole point of the book is to go through all those caveats and words and all of long-term investing and then provide some context around him. But it is funny how that one piece still resonates with people in good and bad ways. People want to pick it apart, and people want to take it and go, the long term actually is your best friend.

Robert Brokamp: To put some numbers on that, in this scenario, Bob starts saving in the early 70s, retires at age 65, and despite being a horrible market timer, you retire as a millionaire, $1.1 million, which is pretty amazing. On the other hand, if he had instead just been dollar cost averaging into the market over that time, he would have had more than twice that, $2.3 million.

Ben Carlson: The point of that was my big takeaway there is like, don’t try to overthink this, and try to perfectly time when I should put money in and when should I take it out? If you just consistently put money into the market and diversify your entry points. That’s what I like to say about the beauty of dollar cost averaging is not only that most people do it because when they get paid. They invest when they get paid. People get paid on a set schedule. They don’t sit there with a lump of money unless you get an inheritance or something or win the lottery. Most people invest on $1 cost average basis because that’s how the world works, and that’s how you save over time. You save on a monthly or weekly basis or whatever. But you diversify your entry points. One entry point is not going to crush you if something does go wrong. Guess what? It’s also like a very simple strategy that doesn’t require a lot of brainpower. It doesn’t give you a lot of brain damage of trying to pick the right time. Gosh, what if I pick the wrong one? What if this happens, and you don’t have to what if as much anymore when you just spread your bet?

Robert Brokamp: Story of Bob shows that long-term investing historically worked out. You have all great statistics in your book showing that the risk, but also the rewards. Are there 1 or 2 facts or figures in your book that you hope really stick with people when they’re done reading your book?

Ben Carlson: The one that’s always stuck out with me that I’ve used a lot is I looked at the 30-year returns for the U.S. stock market, going back to the 1920s. Let’s say you actually picked the very worst. You’re worse than Bob. You put your money in right before the worst crash in history, and you put your money in September 1929 of the Great Depression. You put your money in there, and you hold it for 30 years. How did you do? Reinvested dividends along the way. The worst 30-year return that we’ve seen over the past hundred years in the U.S. stock market is about an 8% return per year. Which is crazy. Now, you had to live through an 80% crash to get there. I don’t know how many people actually had the wherewithal and the ability to do that. But it is shocking that even at that worst point in history, you said it like an 800% total return from that point. I think that one is interesting to me.

I really liked the Roger Federer stuff. It’s funny, I put two tennis people in my book. I’m not a big tennis person. I never played tennis or anything growing up. My dad tried to get me to play. Didn’t really stick with me. But Roger Federer said that he won 80% of his matches, one of the greatest professional tennis players of all time, but he only won 54% of his points. Those numbers line up almost exactly with the stock market like on a daily basis. The market is up something like 52, 53, 54% of the time. It’s only a little better than a coin flip that the stock market is up or down on a given. But you extend your time horizon and you go out 3-5 years, now we’re talking about being up like 80% of the time on an annual basis. I thought that parallel was interesting, too, that just the longer you extend your time horizon. I always say that the stock market is the best casino in the world. Because the longer you stay in a real casino, the worse your odds of success. The house always wins because the longer you stay, their odds are in their favor. It’s the total opposite in the stock market, which is always funny to me when people compare the stock market to a casino cause if it is, it’s the only casino where the house doesn’t win if you stay in longer.

Robert Brokamp: One of the facts that I took away from the book, which is related to that, is that we all know that the long-term return of the stock market is 10% since the 1920s. But the number of years that the stock market actually returns anywhere around 10%, between 9 and 11%, very low, like three. One of the aspects of investing in the stock market is you don’t really know what you’re going to get in the short term, but the longer you hold on, your range of returns narrows, which makes it easier to plan for things like retirement.

Ben Carlson: Yes. I think the number I give that the volatility of returns over 30 years, there’s actually a wider range of results in bonds and cash than there is in stocks, which is interesting. You’re right. It narrows and narrows the longer that you hold it for. That other one about the average, I always say that the average stock market return is never average in a given year. I think the average year and an up year for the stock market is like 21%, and the average year in the down year is down 13 or 14%. It’s a really wide range from any given year. That’s one of the things that makes the stock market so interesting and challenging. Because if you could just plan, I’m going to get 10% here, 10%. It would make your life much easier. Financial planning would be easier, your emotions would be easier. But if the stock market did that, if it was easy, you wouldn’t get the risk premium. A stock market has to be volatile like that to give good returns over time. That’s the thing that gets people is getting too high or too low when things are really good or really bad.

Robert Brokamp: You had mentioned the Great Depression, and a lot of the data in your book does start with 1928, so it includes the depression, which was just horrible. It wasn’t just one bear market. It was a series of bear markets. Overall, the market is down 86%, as you point out in the book that after a loss like that, you have to earn 615% just to get back to break even. When you see other statistics about historical returns out there on social media or even from some financial services firms, they often start at the end of World War 2 or maybe 1950, which I think implies that they think, the Great Depression, that couldn’t happen again. But you chose to include it, and you point out how bad it was, you point out that 18 of the 26 worst monthly returns of the stock market happened between 1929 and 1940. Do you include it because you think, wow, if it happened in the past, of course, we could have another Great Depression. You think we’re probably beyond that, but it’s still important to include it because it shows that even long-term investing could survive those horrible returns.

Ben Carlson: I think it’s worth including because it’s part of the long term. I think that’s interesting, too. Hey, that 86% crash is the 10% return is inclusive of that 6% crash. But I think I don’t necessarily think it could happen in the US, save for an alien invasion or something. But even if we got attacked by aliens, we’re probably going to spend on infrastructure, so maybe that’s a boon to the economy. But it’s happened in other countries. I think you can look at other countries around the world and have a 70, 80% crash in the stock market.

One of the other things I talk about in the book is how ownership has changed over time. That was one of the interesting things I found about the Great Depression is basically no one owned stocks back then people couldn’t really afford it. There wasn’t a lot of disposable income. The number I found was like two to 3% of households even owned any stocks in the Great Depression. It’s a misnomer that everyone lost their shirt and got crushed in the stock market. It was more the economy that really crushed people back then. I think the fact that the stock market is more important these days and we’ve seen in the crisis period, the Fed and the government is willing to throw the bazooka at these problems, I guess you could say, Well, maybe if they didn’t do that, then all bets are. But I think it would be hard to have that happen again, but if you’re a globally diversified investor, could it happen in another smaller country if you are exclusively in that country? That probably could happen. They don’t maybe not have as diversified of the economy as we have, or have a central bank that was willing to do this with the global reserve currency.

It’s part of the history, and maybe part of the reason that we don’t have a Great Depression anymore is because we lived through it already. The reason that we had such high fiscal stimulus in 2020 with the pandemic, I think, is because we lived through 2008. I think there is some market knowledge that builds on itself. Then you wonder, well, are you just transferring these one risks to other risks? That’s the thing I’d talk about in that chapter is like these normal accidents, like trying to make these complex adaptive systems safer. All it does is you move risk from one thing to another, and it manifests in different ways.

Robert Brokamp: The phrase long term has come up a bit in our conversation, and it’s in the subtitle of your new book. But what does that mean for you. What’s the timeframe for you for which, someone says, I need money in this number of years, and you’d say, well, that should be in cash. Or I can leave it alone for this number of years. You’re probably going to be okay in the stock market. I’m sure there’s a bit of a gray zone in between those two.

Ben Carlson: I think it’s something like probably if you need that money in five years or so, it probably shouldn’t be in the stock market because you can have really bad returns over a five-year period. Most of the time the stock market is up over a five-year period. But I think if you’re talking about something like a down payment for a house or something or a wedding, I think you’ve got to be pretty careful and at least have some diversification there. I talk about that in the book, too, that having an offset to the stock market is a good idea, just so you’re not selling stocks when they’re down. I think that’s a pretty good rule. Some people would say, that’s way too conservative. What are you talking about? I can handle that. Maybe it is. I think, personally, in terms of a barbell, if you need to have that money, I don’t want to be in a position to sell stocks when they’re down and be a forced seller at a bad time, because I think that’s the whole thing about stocks in a bear market is if you have the ability to extend your time horizon, not just buy more in a bear market, but just let it ride and not have to sell, I think that’s a big part of it. I think long term for me is 5-7 plus years or something like that.

Robert Brokamp: You’ve touched on international investing a little bit and mentioned Japan. I’m about, I don’t know, 15 years or so older than you. I was a teenager in the 1980s, which was just a fantastic decade for Japan. I remember all the headlines back then about how Japan was taking over the world. There was worried that U.S. would be surpassed. American companies were being encouraged to take on Japanese business practices. Japanese companies were buying up real estate like the Rockefeller Center and companies like Firestone. But then things changed in 1989. The Japanese stock market plunged and didn’t get back to its previous high until relatively recently. You devote two chapters to Japan in your book, tell us a little bit about how crazy things got and what you think the lessons for investors are when they look at what happened in Japan.

Ben Carlson: When I went to go title this book, I jokingly said to my publisher that I wanted to call it “Now Show Japan.” That would have been a little too inside baseball, I think. But that is the one thing I hear all the time from people over the years when they push back against the idea of long-term investing, because I am a big proponent of long-term investing. I’d say in the book that buy-and-hold investing is not a perfect strategy. It’s just better than all the other ones. That’s the way that I feel. But everyone says, fine, great. Buy and hold works but what about Japan? I go through to show that I really do think that was the biggest financial bubble of all time because it wasn’t just the stock market that was trading with 100 times earnings. It was the real estate market, too, as you mentioned. The numbers that I share in there are just hard to believe. It’s funny because the Japanese, traditionally, they don’t get as high and low as we do. They’re pretty even keeled people, they have these long-term businesses that have been around forever, and they don’t really have these booms and busts as much as we do, and so the fact that they got pulled into it just shows how strong that can be, that human nature piece. You’re right. They didn’t just have a lost decade they’d lost like 3.5 decades. It was really until last year that Nikkei finally broke above it.

People always say, fine, smart guy. What about the Japan situation? I show that, yes since 1989, 1990, the situation in Japan has been pretty dire. It is interesting, though, that, there’s not huge financial strife in Japan because of this. They increased their savings. They maybe had more money in cash. Families helped out. They also invested in bonds. If you were a globally diversified investor, you barely notice it. Even though Japan was almost half of the world market cap at the peak in 1989. It was bigger than the U.S. stock market. Then it went all the way back down to, like, 5%. I went from the biggest stock market in the world. Imagine if that happened to the US right now. We went from 65% of the global market cap to 20% or something. You’d think, what happened? How did the rest of the world go on? If you look at just the MSCI All World, it still did like 9% a year with that happening. Again, inclusive of that. I did it in the book. If you extend Japan back to 1970 when the MSCI indexes start, you earn almost 9% per year. Maybe I’m extending my definition of long term. You asked me in the last question. But over the long term, Japan’s returns have been pretty good. It’s just that they compress those returns in such a short period of time that mean reversion had to rear its ugly head, and you put the really bad period with a really good period, and it evens out. It just depends. Were you lucky enough to invest in the good period or did you have bad luck that you invested in the bad period? How do you reconcile?

Robert Brokamp: It’s amazing that their economy was still strong. The second biggest economy in the world. Most of that period surpassed by China in the last several years. But it’s not like they were going through their own Great Depression. They still had a great economy. Their stock market just wasn’t so great. We’ve had that time here in the U.S. We talked about the Great Depression. Not that long ago, we had the lost decade. You write about that in the book. That is the first decade of this century, which I think is a great period to look at because first of all, it wasn’t that long ago. Over that decade, the S&P 500 lost money, two brutal fair markets of losses of more than 50%. The NASDAQ was down 80%, so pretty bad. But as you point out in the book, it may not have been quite that bad if you were diversified.

Ben Carlson: Coming up with my investment career in that decade, I think it was really helpful to me in understanding, again, that bad things can happen, but also the benefits of diversification. A lot of other asset classes did just fine, the S&P, like you said, lost almost 10% of value in those 10 years. It got cut in half twice, two recessions, one of the worst decades we’ve ever had in the U.S., from an economic and a market perspective. But if you spread your bets and you invested in bonds or REITs or small caps or mid caps or value stocks or international stocks in emerging markets, all these other asset classes still did pretty well for you, actually. Emerging markets was probably the best one. Rates did really well, which is interesting because there was a housing market crash, and real estate didn’t do so hot. But that was interesting. I mean, I think a lot of people who are newish investors would be surprised to hear that that happened because for the past 12, 15 years, everyone says, why would I invest in anything besides the U.S. That is not what people were saying coming out of 2009. It was, man, we’ve got to figure out a way to get out of here and go somewhere else and invest overseas or investing in other asset classes.

I think that’s a great lesson, too, of what happened after the last decade. When people were ready to give up on U.S. stocks, and now they come back with a vengeance, and they’re the strongest again. I think that’s why diversification can be so helpful but also challenging to people. If you’re diversified, you’re always going to have something in your portfolio that you have to go. Why do I own this? Or something that’s doing well, you go, why don’t I own more of this. It’s a balancing act that you want to just be in the thing that’s doing the best. But that’s a really challenging strategy, as well, because a lot of times the best performer ends up being the worst performer. Then what do you do?

Robert Brokamp: I think one of the other main lessons in your book, the value of diversification, but it’s not always easy to stick with because as you said, something is always going to be underperforming. One of my favorite lines about diversification came from financial advisor Lou Stanasolovich who said, “If something isn’t down in your portfolio, you’re not diversified enough.” But it’s difficult to stick with that. The other line, and I don’t know who said it was, “With diversification and things like target date funds, you’re never going to make a killing, but you’re not going to get killed.” You just have to be very comfortable, especially over the last several years, 2025 was a little different. But since the GFC, owning anything other than the S&P 500 or anything other than tech and growth stocks, you felt like a fool. Not a Motley Fool, but a lowercase fool. But then 2025 came. The last few weeks or so far this year, diversification is paying off a little bit better.

Ben Carlson: I say, you don’t have the chance for the home run anymore. You’re giving up the strikeout. I think being an extreme position in the markets, obviously, they have people who say, you concentrate to get rich, you diversify to stay rich. But I think some of that is survivorship bias that we see the people who have concentrated, but we don’t see all the other people who did it didn’t work out for them because they took an extreme bet, and guess what happened? They picked the wrong horse to bet on. I think that’s what’s so hard. I think the extreme position of higher highs and lower lows, if you’re concentrating or investing, you just have to have an intestinal fortitude, that’s like an iron will, and I think that’s really hard for some people. That’s what diversification can do for you is just hopefully make it a smooth ride along the way. Even though it can be challenging, too. I think the other maybe big point of the book is just that there is no perfect strategy for everyone. This tough is hard. You can make your portfolio or your investment strategy as simple as you want it to be. I don’t think there’s any one way to invest, that’s the right way for everyone. I think a lot of it has to do with your own personality. But even if you simplify down to the core, there’s still no easy investment strategy. Everything is hard. You’re making trade offs from one risk or one betting to another.

Robert Brokamp: The old phrase “choose your hard because nothing’s easy.” You just have to choose which hard you’re happy to live with. Thanks for listening to part one of my conversation with Ben Carlson. Tune in to our April 19 episode for Part 2. But for now, thank you for listening, and thank you to Bart Shannon, the engineer for this episode.

As always, people on the program may have interest in the investments they talk about, and The Motley Fool may have formal recommendations for or against, so don’t buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I’m Robert Brokamp. Fool on, everybody.