Throughout my teaching and writing over the decades, I have tried to universalize the idea that using low-cost index funds that buy and hold all the stocks of companies in the market is the optimal method of investing. Over 10- and 20-year periods, that investment strategy produces higher returns than more than 90% of the portfolios that are actively managed by professional investors. It is easy to implement and accessible to anyone and everyone.
I have frequently demonstrated the benefit of index investing by calculating the theoretical returns of a “John Doe” investor who put an initial $500 into the first index fund that began in January 1978 and then $100 each month thereafter. The final value of that investment, as of January 2026, would be roughly $2.2 million.
Of course, no one can be sure that the next 48 years will provide the same market outcomes as in the past. But my calculations show the tremendous potential gains possible from steadily investing modest amounts of money and sticking with the program on a regular basis, no matter how optimistic or pessimistic you might be.
Unfortunately, that sense of discipline is lost on the many Gen Zers who have turned to easily accessible betting and prediction markets as a way to see big returns quickly—or so they hope.
Prediction markets have been wildly successful in attracting hopeful individuals and investors and turning them into gamblers. For Gen Z in particular, they are a path to financial ruin, one that should be avoided in favor of the less glamorous but more rewarding alternative of index funds.
Prediction market revenues from the leading platforms Kalshi and Polymarket totaled about $25 billion in April. U.S. News & World recently reported that more than a quarter of prediction market gamblers it surveyed were betting more than $500 a month. Most lost money. And according to a recent Wall Street Journal study, more than 70% of 1.6 million surveyed bettors on Polymarket had lost more money than they had made. The profiteers were likely the participants with access to inside information and the market makers benefiting from the large trading costs involved.
In general, betting profits go to the platforms, not the bettors. Consider a sporting bet on a game in which two teams are evenly matched. The betting odds are 50-50 for each team to win, so both teams would be listed as “- 100.” That means if you bet $1,000 and win, your payout is $900. Of course, if you lose, you forfeit the whole $1,000. Thus, even if you are correct half the time, you will be a consistent loser.
The unfavorable betting odds are often even worse in prediction markets where individuals are guessing on whether a state leader will be killed in U.S. military action, for example. (A likely government insider made significant profits betting on that occurrence on Polymarket just before it happened.)
By contrast, the stock market could be described as a gambling casino but with the odds in favor of the individual. Over the past century, the U.S. stock market has returned about 10% a year, and trading costs are as low as a penny per share or sometimes even less.
The tragedy is that a multitude of young people today are spending $100 a month on an activity that is likely to produce persistent losses. At the same time, the country faces a retirement crisis. An inordinate number of people are facing retirement with inadequate savings either to meet financial crises or to provide some steady income for their future living expenses.
There is an urgent need to give Gen Zers a financial education and teach them the power of compounding investments. Their $100 lost gambling today could be worth $4,500 40 years from now if it were invested in a Roth IRA.
More pernicious, however, is the public-health impact of betting.
Many experts have described soaring gambling addiction rates as a public-health crisis. A quarter of respondents in The Wall Street Journal survey said they have missed bill payments because of gambling. Others said they have lost their life’s savings. Countless Gen-Z gamblers, mostly young men, are struggling with isolation and even suicidal thoughts.
Perhaps by considering both the pain of loss and the enormous future income forfeited by gambling, we could at least give those addicted to betting some second thoughts.
That’s the sane way to turn losers into winners.
About the author: Burton G. Malkiel is the author of A Random Walk Down Wall Street.