Investing or Gambling: What’s the Difference?
People will often say that investments are a gamble. However, are the two terms truly synonymous in the way many of us tend to think? The reality is that investing and gambling are two very different actions with very different consequences. Although the two might have some similarities, the subtleties describing the these terms speak to very different ideas. We explore these more below, in an effort to educate you on the differences and, yes, similarities between investing and gambling. Read on to find out more and learn how to spend your money wisely.
When defining the term, “gambling,” words such as risk, chance and uncertainty come to mind (Ref.1). Gambling is the act of taking a risky financial action in the hopes of making money in return. This is what makes gambling entirely chance-based. There are no guarantees with gambling, as much as the the players themselves think otherwise. In fact, the casino itself often has the advantage over the gambler, which obviously increases the level of risk.
For the most part, the casino has a mathematical advantage, known as “The House Edge” (Ref.2) over the individual placing the bet. These mathematical advantages are referred to as “odds,” which are never in the gambler’s favor. In casino games or betting opportunities like sports betting, players will often have to raise the stakes in order to overcome these disadvantages, which make the behavior all that much more risky and costly for them. The idea is that the casino gains on the bets placed by a gambler regardless of whether they win or lose. Ultimately, if your goal is to bank in on wins and make money, gambling is not the safest or most efficient route. You will have to overcome some very sophisticated mathematics to do so, and even there, your chances are low. However, if you are looking to have a little more fun with your money, veer towards some of the best bingo sites (Ref 3) out there, as they offer players the opportunity to bet low without the risk of huge losses along the way.
The act of investing is defined by “committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit” (Ref 4). The action is followed-through due to an understanding of the market and the potential it holds in being able to reciprocate on your personal contribution. This predictability and the idea of reciprocity is what differentiates gambling from investing.
Unlike gambling, investors owe a portion of something when they choose to place their money in a business, product or market share. They immediately buy into the endeavor, which means they automatically owe a portion of it. If markets go up, or if the business they’ve invested in thrives, they also earn. Truthfully, everything fluctuates which means not all is gained, but most often than not, what goes down, will eventually come up.
Investors can also make safe bets, which ensure they will get small incremental gains over long periods of time. Although the benefits here may not be great, they are sure to only see positive results in the coming years. This safety prevents from total loss and inspires confidence in the investor with regards to where they choose to put their money.
Gambling and investing are comparable when it comes to discussing money and the risks one can take with it. Whether you are placing a high bet during a sports competition, or have decided to invest in a high-risk account, you are making brave choices with your money which do not guarantee positive outcomes.
However, the two actions are entirely different in scope. Gambling is purely based on chance and the assumption that the bet will eventually pay off. Investing is done with the scope of earning in the long-run, using predictive analyses and market trends to make sound choices. If you want to spend your money wisely, consider making an investment, and you’re more likely to see your money grow.