The Role of Risk in Your Financial Plan

September 8, 2026

Recently, Minnesota tried (and failed) to outlaw prediction markets such as Kalshi and Polymarket. If it had succeeded, other states likely would have followed.

For now, prediction markets appear to be here to stay, and they are just one of the growing number of ways consumers are being encouraged to put their money on the line. Sports betting is already ubiquitous. Meanwhile, prediction markets are expanding the definition of what you can wager on, from elections to the weather. And at the same time, investing platforms may be inviting you to get in early on the next hot AI company or other speculative investment.

There is nothing inherently wrong with taking a financial risk. But it is worth recognizing how many opportunities there are today to turn investing into entertainment, or gambling into something that looks like investing. These activities may be fun, and in rare cases, pay off, but they are not a reliable strategy for building wealth.

If wealth is your goal, there are likely better places to put your money. That does not mean you should never invest in something risky. You just have to think it through. Does the risk level make sense in your financial plan? And does the potential return justify the risk you are taking?

The Odds Are Not in Your Favor

What causes market prices to change? It begins with the never-ending stream of news informing us of the good, bad and ugly events that are always taking place. For example, when there are reports that a fungus is attacking Florida trees, orange juice futures may soar, as the market predicts that there is now going to be less supply than demand.

But what does this mean to you, your investment portfolio and every investor’s quest to buy low and sell high? Should you buy, sell or hold tight to your juiciest investments?

Before the news tempts you to chase or flee active trends, it is critical to be aware of the evidence that tells us the most important thing of all: You cannot expect to consistently improve your outcomes by reacting to breaking news.

Great Expectations

Sports betting was illegal in the United States for 26 years. But it took off in 2018 after the Supreme Court ruled that states, not the federal government, were allowed to regulate it. Now, it is legal in one form or another across most of the country. In 2025, Americans staked $166.9 billion on sports bets and the industry took in almost $17 billion in revenue, according to the American Gaming Association.

The economics are straightforward. When you bet on a football game, you are staking money on an uncertain outcome, with the potential payout set by the bookmaker to favor the house. If you lose the bet, you typically lose everything you wagered. Because the odds favor the bookmaker, placing more bets does not improve your chances of coming out ahead over the long run. In fact, the opposite is often true.

That is one of the biggest differences between sports betting and investing. With a traditional investment, even one that declines in value, you still own an asset that could recover or retain some value. A sports bet is different. It either pays out or it does not. If you lose, the money is gone, and you have to put up more to make the next bet. That distinction can blur as betting becomes more accessible, entertaining, and integrated into the financial apps people already use.

A New Face for Gambling

Prediction markets such as Kalshi and Polymarket take betting a step further. They let you buy and sell contracts tied to a wide range of uncertain outcomes. You could bet on whether a TV character will die in the next episode, who will win an election or whether the economy will enter a recession. In practice, they are similar to placing a sports bet. But words like “markets,” “contracts” and “trading,” along with charts and graphs, can make the experience feel more sophisticated. More like investing than a sportsbook. The terminology may be different, but it does not change the underlying uncertainty or improve the odds.

There are other risks, too. The regulatory status of prediction markets is still being sorted out, and outcomes tied to the conscious decision of a single person (say, an Oscar winner mentioning their dog in an acceptance speech) are vulnerable to manipulation or trades based on insider information.

The AI Get-Rich-Quick Pitch

The same dynamic can play out in the stock market, where speculation can be dressed up as investing.

In the late 1990s, companies added “.com” to their names to ride a wave of investor enthusiasm for the internet. Today, invoking AI is a favored way for companies looking to attract optimistic investors, even when the connection between the company and the technology is tenuous.

Consider the shoe company Allbirds. In early 2026, it sold off its footwear business, announced a pivot to AI infrastructure and rebranded as Smartbird, Inc. Its stock price subsequently soared nearly 600% in a single day. That is despite Smartbird having no AI products, services, or meaningful track record. Investors eventually got wise, and the stock price receded to pre-pivot levels by late August.

The episode illustrates the danger of confusing a promising technology with a promising investment. AI may transform the economy, but that does not mean every company associated with AI will succeed. Nor does a company’s use of AI in its marketing tell you much about whether its underlying business is sound.

Before investing, ask yourself a few questions. How does AI genuinely fit into the company? What does the company actually do, and how does it make money? Does it have real competitive advantage? Is the stock already priced for the best-case scenario? It is easy to ask, “What if this company takes off?” But the important question is, “Is it worth the risk to find out?”

Aligning Risk with Your Goals

The common thread among sports betting, prediction markets, and speculative investments is uncertainty. The packaging may change (a sportsbook, a trading platform, or an AI stock) but the temptation is similar. Put some money down today for the chance to make much more tomorrow.

That can be exciting. It can also make it easy to lose sight of what your money is supposed to accomplish.

A good financial plan is designed around your long-term goals, not short-term results. It is important to distinguish between money you are putting to work for your future (where the goal is to make success as likely as possible) and money you are putting at risk purely for fun.

This post was written and first distributed by The Writing Company.

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This material is intended for general public use. By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. This is not an offer to buy or sell a security.

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