If you’re an avid gambler, or someone whose been making investments for years, you probably understand why people consider these two activities similar. In the end, they’re both choices made without an understanding of if the result will benefit you or not.
But there are some pretty significant differences between standing at a blackjack table and studying a potential growth stock. While they both involve making a choice based on a myriad of possible outcomes, some key differences separate an investment opportunity from gambling that you should be aware of.
What Is Investing?
When you choose to invest in something, you’re committing funds and capital to an asset believing that you’re likely to generate some profit. Risk and reward are generally considered, with low-risk and high-risk assets having their place in either portfolio. Investors decide how much of their capital to risk, and in general, most investors focus on reducing risk and minimizing potential losses. Additionally, investors receive a share of the entire company, usually paid off in stock dividends.
What Is Gambling?
On the other hand, gambling is heavily dependent on chance. In most gambling events, there isn’t as much information to study as you might have when making a bet. You simply place a wager that something will happen and reap the benefits if it does or lose your money if it doesn’t. In a way, gambling is an investment in hope. There is a risk-reward component to gambling, usually based on how much you’re willing to place on the outcome, how many other potential outcomes there are, and your perceived likelihood of success.
For most professional gamblers, studying team history, track records, and other cues are your best bet at success. You can observe the mannerisms of your opponents in certain card games or the betting patterns of competitors to give you a bit more insight into the right approach.
Investment Risks and Gambling Risks Are Very Different
Investors can start high or low and are in more control of their odds of success than you might think. Investing in a thriving technological company may not be as high-risk as you think, but it can guarantee a profit in the long run — even if things go sour in the beginning. For gamblers, the odds are stacked against them. Wins or losses are often up to random chance occurrences, and while the results are usually instantaneous, it usually works against you. Investors can make long-term investments and plays and won’t take a win or loss until they cash out.
How Investors Impact Their Odds of Winning
Yes, investing involves risk, and you’re technically taking a gamble no matter how educated you are on the topic. But investors have plenty of ways they can impact their odds of success. A solid investment strategy can greatly impact the likelihood of making money and prevent substantial loss. It’s also important to remember when investing that making a profit — whether it’s 2% or 10% — is still a profit, giving you multiple opportunities to win in the stock market.
Investment Requires Hard Work
One of the biggest separators between gambling and investing is that hard work can dramatically improve your odds of success. In addition to the “house edge” phenomenon (in which it’s believed that a gambler’s odds of beating the house decreases per each round), there’s only so much you can study to impact your game. One bad shot or injury can impact the outcome of a sports match, while investors can selectively invest in companies and choose when they want to take out their return.
Investors Focus on Preventing Loss
A huge part of investing is mitigating loss. When gambling, you’ll either win your bet or lose your money with no way of getting it back. When investing, you can apply new financial information to your investment evaluation, and choose when to take the plunge. Additionally, even if you’re not receiving the expected return, you can set selling and loss prevention thresholds to ensure that your stock doesn’t drop below where you’re uncomfortable with while you wait for a profit.
Investors Can Use Time to Their Advantage
When gambling, you’ll either win or lose based on the outcome. When you invest, time is on your side. In general, the market will go up over time, so even when safe stocks dip or you’re in a market recession, it’s guaranteed that things will pop at some point. This time advantage means that even if you’re at a loss or in an uncomfortable situation, there are scenarios in which you can expect the passage of time to increase your reward.
Invest in Resources to Help You Overcome Problem Gambling
If you’re having difficulty with problem gambling, a worthwhile investment would be to find ways to recover from these issues. At 800-GAMBLER, we have a ton of information and resources that help you get the right treatment for any gambling issues. The best investments are the ones you make to improve your life, so don’t hesitate to call our 24/7 confidential helpline at 1-800-GAMBLER. Combat problem gambling by finding a help meeting and receiving the right support for you or a loved one in need.