what is the different between investing and gambling?
not buying it folks
oops - difference*
thanks for everyones answer
- Anonymous1 decade agoFavorite Answer
When gambling you get complimentary food and drinks.
When investing you lose your shirt.
Read the book Stock Market Wizards, and you'll know the difference.
This question is asked often here, often debated by beginners that have not defined their own terms. Just enter "gambling investing" in the Answers search box to get tons of answers.
Google "gambling vs investing" and you'll get tons more answers if you really want to know the difference. But if your mind is already made up, you won't look and are wasting our time.
Approached as a gambler with only chance and luck and a newspaper or TV to guide him, trading or even investing are similar to gambling or betting on a horse race.
By the Trader's definition of trading, it is not. Traders focus on risk control and money management. Gamblers rely on chance, roll the dice and hope. Traders are buying and selling an asset, gamblers hope on nothing.
Timing is critical to the Day Trader, since by definition, they must be out by the end of the day. His ability to concentrate fully and intensely can mean the difference between consistently taking home huge profits and barely staying above water. It's vital that he pay attention to multiple sources of information, sift through them, prioritize each separate piece, and make an astute decision once all information has been scrutinized, and depending on the time frame or volatility, this may need to be done every few seconds or minutes. You can't be distracted and unfocused while formulating a trading plan or monitoring an ongoing trade, unlike the drinking/partying gambler who is there to be entertained.
We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved, like a gambler
One of the most important Samurai texts ever written, by Miyamoto Musashi, “The Book of the Five Rings (1643)”, offers this advice: “Think of what is right and true. Learn to see everything accurately. Become aware of what is not obvious. Be careful even in small matters. Do not do anything useless.” Gambling may be fun and entertaining, but it is useless.
There can be no great success in trading (life) without great commitment, hard work, discipline, and the realization of the “right” type of thinking.
Now investing is a whole different ball game, much simpler to rebuke of the gambler label. So let’s define our terms.
What Does Speculation Mean?
The process of selecting investments with higher risk in order to profit from an anticipated price movement.
Investopedia explains Speculation
Speculation should not be considered purely a form of gambling, as speculators do make an informed decision before choosing to acquire the additional risks. Additionally, speculation cannot be categorized as a traditional investment because the acquired risk is higher than average.
More sophisticated investors will also use a hedging strategy in combination with their speculative investment in order to limit potential losses.
What Does Investing Mean?
The act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit. Investing also can include the amount of time you put into the study of a prospective company, especially since time is money.
Investopedia explains Investing
Investing is the key to building wealth, but investing in and of itself is not enough. You have to invest wisely!
Now, if you just follow the accepted idea of what investing is, by definition, does it sound anything at all like gambling?
In stock investing, there are broker fees and commissions. You pay these irregardless of whether you make any gains on your investment. If you make gains, you’ll also have taxes to pay.
When you place a bet on a casino game, you are actually buying a “chance or opportunity”. It is an intangible product.
When you invest in stocks, you are investing in the business. You are investing into a tangible product or business.
Gambling is a type of entertainment. Nobody in their right mind will use gambling as a means to a better financial future (there are always exceptions, but very few). Why? Because over the long-term, the casino always wins (in general). There is nothing for the gambler to own here.
Investing in stock is a good way to build up your personal wealth. It is a great tool to offset inflation. Over the long-term, your investment will appreciate and at the same time you also earn dividend income from your stocks (from assets and things that you own).
Your relationship with the casino is limited to the time your stake is on the table. If you bet “Banker” and the outcome is “Player”, you lose and your relationship stops there.
When you buy a stock, you build a long-term relationship with the business. Your relationship doesn’t end when the share price moves up by $1 or falls by $1. It ends only when you decide to sell it.
When you lose your stake in a casino game, your stake is gone. There is no way for you to recover your losses unless you bet more of your money.
When share prices fall, you still have your stock with you. The business still runs, unless the company files for liquidation. You can still hold on to your stock and wait for the market to recover. There’s a possibility for you to recover your losses without investing more money.
There is risk in gambling. There is also risk in stock investing. However, in stock investing, you can manage and minimize your risks. Some ways are hedging and structuring your portfolio with different types of stocks to match your risk appetite.
Gambling is a game of chance. No amount of skill (with the exception of card counting in blackjack) will tilt the odds into your favor.
However, in stock investing, if you do enough learn how to trade and research your stocks before you invest then you will fare better than the average investor. A wise investor certainly can use his knowledge and skills to tilt the odds in his favor.
A true investor will have a plan. They enter and exit the market based on the prospect of the stock over the long-term. This makes them less vulnerable to short-term fluctuations, hence reducing the gambling element.
Just because there is a Bernie Madoff exists or whether GM goes under, does not make us all gamblers.
- Vin ALv 41 decade ago
There is no similarity, unless you consider trading complex derivative products as investment, I don't.
Investment is when you put your money in a business with a hope to get return when the business makes money. The return is in the form of dividend (or partnership profit). And also in form of the increase in the value of your investment. Say you buy 10% of a business for $1000. It did good. Now people are willing to buy your share for $2000. Here everybody could be a winner.
Gambling is when you bet put your money for a hope to get multiple times or nothing. The outcome is purely random and not dependent on the performance of a business or market. Here everybody cannot be a winner. The total winnings are always less than or equal to total losses (over a period). Basically the money flows from many people to a few lucky ones and some share to the party facilitating the gambling. There is no real trade, no product or service, no measure of performance or competence, it is pure luck.
risk+luck=return or risk=loss
- 1 decade ago
I'm starting with an example.
If you have a kid who delivers newspapers he would be making an investment if he purchased a bike or a car so that he could deliver more newspapers faster and thereby make more money. The other idea would be for him to take the money he's earned and not buy a bike but instead buy lottery tickets. That would be gambling as I'm sure you know.
I am an investor and I normally hear this question from people who believe that gambling and investing are essentially the same thing. They have already made up their minds and the question is more of a challenge than an actual desire to learn something new. The reason people decide that investing and gambling are the same is because they think of things like stocks as investments and they recognize that both gambling and the buying and selling of stock have risk involved.
The level of risk in gambling is always greater than 50% that you will lose your wager. Gambling is meant as entertainment because "it would be funny if you won" because the odds are literally against you winning.
When investing people typically make an effort to find avenues which are low risk. One example of this is choosing to buy US Savings Bonds. The risk that the US will default on its loans is considered to be low (even though it is entirely possible.) You do not earn much money on this type of investing because the risk is considered to be so low.
There are literally hundreds of examples on both sides. Buying land is an investment for a farmer because he can farm more land, but there is a risk that the land doesn't produce as much of his crops as he expected. He might then not be able to pay his mortgage and then lose his land altogether. There is risk in everything.
Judging by your tone in this question "not buying it folks" I believe that you are one of these people who has determined that investing and gambling are essentially the same thing. This is unfortunate, but it only hurts you.
The main differentiators are -- level of risk and intent. Gambling always has a better than 50% chance that you will not recoup your money and it is intended for entertainment. That is why it is in the fifth house astrologically whereas investments would be second house. Investing can have a 100% chance that you will recoup your money or it could be less, but not as low as 50% or worse. Its intent is to earn a RELIABLE return.
- ?Lv 71 decade ago
Investing can be gambling. For example, if you invest a lot of money in oil and gas drilling, you could lose it all if no oil and gas is found or you could make out very well if the well produces. Even if you invest in something relatively safe like mutual funds, if the stock market takes a big plunge, you can lose your money. Investing is with the hopes that you will make money with your money, and although there is a risk factor and some speculation, there is more of a serious study of calculated risk with the intent that money will grow over time.
Gambling can be a form of investing too, but it is more of an entertainment activity and high risk. There is a chance of winning and big wins, but that winning is random and the odds are stack against most people. People hope that when they gamble, they will make money, but most people who do gamble as a form of investment for making their money grow, end up losing.
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- 1 decade ago
the act of investing; laying out money or capital in an enterprise with the expectation of profit
An activity characterised by a balance between winning and losing that is governed by a mixture of skill and chance(en.wiktionary.org/wiki/gambling)
- Anonymous1 decade ago
Investting means you put money in something like a bank then you gain interest, which is investing when you don't lose any money. Gambling is putting all the money you want into a gamble if you think your goning to win. If you lose, you lose all your money, if you win, you win everyones money which they gambled and you get yours back.
- Anonymous5 years ago
Gambling is when you depend on chance for success and not on knowledge or skill. And it's certainly possible to gamble with stock prices. All you have to do is bet your money on various stock options without knowing much about these companies and hope that you will be lucky and strike it rich with one of them. But most people who trade stocks try to educate themselves and try to use their knoweldge and skill to profit from stock trading. They make educated guesses and predictions about future stock prices. And this kind of forecasting of market psychology and trying to profit from it is called speculation.
- 1 decade ago
Investing is putting money in to hopefully continuously get more and more gambling is more based on luck
- 1 decade ago
men becoming panic in market convert investor to trader then to gambler.