Is investing really a gamble? The numbers.

Writing about the rise of the Ownership Society in the last issue of TAE, I argued briefly with critics of Social Security reform like James Surowiecki of The New Yorker, who wrote that the "Bush plan is asking you to swap an insurance policy for a lottery ticket."

Games of chance are a major theme for the critics. A television ad from the AARP shows two seniors saying, "If we feel like gambling, we'll play the slots." An op-ed in the New York Times calls the President's plan "another opportunity to roll the dice in the investment casino."

Do these critics really believe that long-term investing is the same as gambling? Or are they, as I suspect, disingenuously trying to taint Social Security reform simply because it would haul down America's greatest socialist icon and stand up personal responsibility in its place? In either case, they are wrong to equate stocks with slots.

Modern investing with diversified portfolios like index mutual funds is the opposite of gambling. They will build a far more substantial nest egg than Social Security, so invested savings are much better "insurance" against penury than today's dribbling Social Security payments.

Let's talk actual numbers. At a casino, the odds favor your losing by a wide margin. In roulette, for example, a bet on a single number pays 35-1, while the true odds of winning are 37-1, a house advantage of about 5 percent. Gamble any length of time and you're almost guaranteed to lose.

In the stock market, the odds favor the investor--by a mile. Since 1926, the average annual return of the benchmark Standard & Poor's 500 Stock Index has exceeded 10 percent. Invest long enough in the stock market, and you're almost guaranteed to win.

The key word is "long." In the short run, stocks are very volatile. The best year for the S&P was a gain of 54 percent; the worst, a loss of 43 percent. That's a 94 percentage-point swing. The S&P has produced an annual loss, on average, every three and a half years. That's risky!