Editor’s Note: Nathan’s compound-interest math — $50 a paycheck, 8%, twenty years — is the same discipline that has driven Personal Finance since 1974. America’s longest-running investment newsletter turns 52 this year; its editor, Jim Pearce, has spent more than a decade writing for readers who want to build wealth the measured way rather than bet on the next long shot. His latest briefing argues the next AI winners aren’t the headline chipmakers — they’re the ordinary businesses quietly using AI to widen margins. See the briefing →

Every sports fan has been there.

A last second desperation midcourt shot that miraculously goes through the hoop. A dramatic bottom-of the-ninth walk-off homer. A fourth-and-long Hail Mary heave that somehow connects fifty yards downfield in the endzone.

Half the crowd erupts in triumph; the other half sits in stunned disbelief. The thrill of victory. The agony of defeat. Of course, sports wagering takes these emotional swings to another level – every play matters more when there is cash money on the line.

I visit the sports book on occasion (prefer the horses, actually). But it’s mostly for entertainment value, not retirement planning. When financial advisors talk about “alternative investments”, they are referring to real estate and commodities, not the over/under on the Patriots game.

But for the younger crowd, sports betting is right up there with cryptocurrency as a favored way to build wealth quickly. I’m not being flippant. A new survey from financial website Betterment reveals that 26% of Gen Z considers sports wagering to be a viable “part of their long-term financial strategy.”

One in four.

For context, only 14% of Millennials, 6% of Gen Xers, and 1% of Baby Boomers are counting on touchdowns and three pointers to help score financial goals. I’m not talking about harmless Superbowl pools and March Madness brackets. I’m more worried about younger workers who are more knowledgeable about moneylines and point spreads than their own 401(K) vesting schedule.

In some cases, parlay bets are beginning to replace stocks and bonds. More than 50% of Gen Z respondents have recently placed wagers using cash that was originally meant for savings.

Chalk it up to accessibility.

What once involved a phone call to a shady bookie (or a flight to Las Vegas) can now be accomplished in just a few easy clicks through popular online betting platforms like Draft Kings (NSDQ: DKNG) or Fan Duel. Not to be left out, Caesar’s Entertainment (NSDQ: CZR) and other gaming giants have launched their own competing digital sportsbooks.

It has now been eight years since the Supreme Court overturned a federal ban on sports wagering. That landmark ruling paved the way for explosive growth. Americans placed $6.6 billion in legal bets in 2018. That “handle” quickly surged to $50 billion. Then $100 billion. Then $150 billion.

It reached $166 billion last year, dwarfing most other forms of entertainment. According to Fortune, U.S. box office, book publishing and recorded music sales totaled just $35 billion combined.

Let’s not confuse wagers with industry revenues. Most of the losing bets are paid out to the winners. But the house always takes its cut, generally 5% to 10%. Those commissions amounted to a hold of $17 billion last year, up from $400 million in 2018.

That’s a forty-fold (4,000%) increase… in less than a decade.

Having grown up with wireless devices, Gen Z consumers are flooded with free bets, account credits and other targeted promotions. Approximately 90% of all sports bets are now made online. And technology has facilitated a whole new generation of betting tools and options… like exotic player props and live in-game wagering.

Want to bet on whether a quarterback will throw for more than 200 yards in the second half? Or whether an NHL player will score a goal. There’s an app for that. As I write, there’s a two-player parlay ticket allowing bettors to wager that Pete Crow Armstrong and Munetaka Murakami will both hit a homerun in tonight’s Cubs/White Sox game.

A $10 wager will win $131.12

That instant gratification can be more alluring that depositing money into an S&P 500 index fund and hoping it doubles over the next 7 or 8 years. Unfortunately, in a universe ruled by statistics, the numbers don’t look good. Over the long haul, approximately 97% of sports bettors lose money.

Winning consistently enough to overcome the frictional commission handicaps built into the odds requires rigorous work. James Holzhauer made a career out of it – but he also took home $2.4 million as a 32-time Jeopardy champion. Not your average fan with a $20 hunch that Alabama will cover the spread.

I don’t mean to pick on younger investors. Personal finance is rarely taught in schools, and less than 20% of twenty-somethings work with a licensed financial advisor. So out of necessity, most are self-taught, often seeking money management advice in Reddit forums or AI queries. If you’re reading this, then you’re probably ahead of the crowd.

I would recommend keeping entertainment expenses and savings in separate silos. And remember, compound interest is a powerful ally. Setting aside just $50 from each bi-weekly paycheck ($100 per month) into a fund earning 8% will grow to $18,120 over the next 10 years and $58,131 over the next 20 years.

When the gambling urge hits, maybe consider betting with the house instead… and picking up a few shares of an iGaming name like Penn Entertainment (NSDQ: PENN).

Aside from dozens of physical gaming properties including Hollywood and Boomtown casinos, Penn has leaned heavily into the digital space. It harnessed the biggest name in sports media a few years ago, launching the ESPN Bet mobile app. That partnership ended, but Penn continues to benefit from the splashy $2 billion acquisition of theScore – one of the biggest sports media platforms in North America, with 4 million active users.

Between its land-based and digital operations, Penn took in nearly $2 billion in revenue last quarter and churned out $300+ million in EBITDA. The stock is trading at less than one-third of its former peak, but has been gaining ground this year – rallying 40% over the past six months.

If there’s one thing sports fans love, it’s a spirited comeback.

The patience Nathan brings to today’s analysis — know the odds before you bet, favor reliable compounding over long-shot plays — runs through Personal Finance under Jim Pearce, now in its 52nd year of continuous print. Pearce writes for investors who’d rather build wealth steadily than chase the next exciting trade. His latest briefing makes the case that the next AI winners aren’t the headline chipmakers: they’re ordinary businesses that use AI to quietly widen margins, quarter after quarter. See the briefing →