Investing and betting on the Kentucky Derby

By Dian Vujovich

There’s nothing quite like the Kentucky Derby. Big  hats and mint juleps aside, the winner of this race sets the whole entire horse world speculating about Triple Crown possibilities. And who doesn’t love dreamin big— although the odds of that happening aren’t  particularly favorable.

Only 11 horses have won the Triple Crown since 1919, the last one was Affirmed in 1978.  Odds makers in Las Vegas figure the odds are 1-12  that that losing streak will continue on.

No matter what happens, investing and betting on the ponies do have a few things in common. Yeah, I know that’s not what finaical writers are supposed to write, but you know as well as I do that there is some truth to that. So hear me out. Below are three similarities between the races on Wall Street and those  at the track.

1.Speculation. It’s all aboaut speculation whether you’re placing a bet on a stock or a thoroughbred. Even if you’ve done tons of research, in the end no one knows for sure the kind of run either will have.

2.Slow and steady. In horse racing it’s often all about the pacing. That’s much like the old investing axion, slow and steady wins the race.

From  a recent WashingtonPost.com story by sports columnist, Andrew Beyer comes this:”When a horse takes the early lead without much pressure, setting a slow pace, he will have strength in reserve to fend off the challenges of stretch runners. Conversely, when the early leaders battle each other and run too fast, they are apt to weaken and set the stage for stretch runners.”

3. Long-term investing. Once upon a time, long-term investing —as in a holding period of many years if not decades– was the suggested way for investors to turn a profit. Now that’s all changed.

On Wall Street, thanks to high frequency trading,  the average holding period for a stock is now around 22 seconds. Give that the Kentucky Derby race lasts about 2 mnutes,  placing any bets on today’s race and hoping you’ll be on the winning side of something could be considered a long-term investment.

But then again, it’s only a horse race and not Wall Street. Right?