I know that people can make tons of money on the stock market, but I don’t really understand how that can be. It seems so hard to predict what the market is going to do, and so many people get it wrong. How can expert investors keep making money over time? Isn’t every day a huge risk for them? I can understand how someone might make some money quickly in the stock market, but the fact that companies and professionals are making more and more over decades confuses me. Wouldn’t they eventually get unlucky and lose big?

Making money in the stock market can be quite tricky, and the professionals certainly understand that. You’re quite right that it would be very difficult for a company or an individual to keep making risky bets on stocks with all of their money without ever going belly-up. There are a few reasons that this is, for the most part, not happening. Let’s talk about a few.

For starters, making money in the stock market doesn’t always involve betting all your money on a stock or a group of stocks. In fact, it rarely does. The hallmark of smart investing is a diverse portfolio, and even the biggest investors in the world have plenty of their money in other places besides their latest big stock bet. They are likely to have hedged their bets with money in large index funds (which collect a bunch of stocks), money in the bond market, and money in other forms of investment, like real estate. And, of course, they keep some safely in the bank!

Putting money in bank accounts, near-term bonds, and other relatively safe places limits the growth potential of the cash, of course. But it also provides a nice safety net for investors.

And brokerages also make money on some things without having to gamble themselves. For instance, if you start an account with a stock broker, the broker makes a commission on the trades you make. The money in the market is yours, and the broker is making cash off of your moves–not the results of those moves.

Of course, big banks and brokerages also make bets on the market. They may run mutual funds or exchange-traded funds that collect their best stock picks into one big investment vehicle, and they rely on their success to attract big investors and make money. But here, too, they’re not merely making their best guesses: they’re helped along by calculations and computers, say the developers at Algo Terminal, an algorithmic trading platform.

Ultimately, we can all learn a bit about investing from the companies and pros that make their living on Wall Street. We know that most of these pros fail to beat the market, even with all of their advantages. We know that they’re surviving anyway, because they draw salaries funded by brokerage fees and other reliable sources. And we know that they protect themselves by diversifying their investments, keeping plenty in index funds, the bond market, and more while trusting the market to go up over the long term (a pretty safe bet). It’s okay to invest in some riskier things, but it’s key to remember to protect yourself when you invest!

“Price is what you pay. Value is what you get.” — Warren Buffett