Financial Gambling

Gambling VS. Investing: 4 Key Differences

Investing, the same as gambling both involve choosing where you put your money and the risk of losing them, but both promise hopes of big profits. So, what’s the difference when you compare gambling vs. investing? The answer to this would be no! They are two different things. Gambling is a result of emotions, and the gamblers go all in and may win or go home empty-handed while investing on the other side is a well-researched process. Read on, and find some basic differences between the two.

Gambling

Source: unsplash.com

The gambling definition would be wagering, as we all know, or staking. It means risking money on something that involves chance and has an uncertain result.

Professional gamblers are very serious when taking risks comes into the equation. They will research the opponent’s history, find the weakest side of their opponents, and, in some cases, even memorize their opponents’ wagers 20 hands back and study mannerisms in hopes of better winning chances.

But, Gamblers are not just playing against their opponents… In fact, they’re also facing the house. Reviews websites like playcasinoscanada.com state the most popular games among the users. The most common games are slots, video poker, blackjack, and lotteries. In This case, the gambler’s luck is put in the machine’s hands.

When all is said and done, gamblers don’t have the chances in their favor. In fact, they might even lose more than their investment.

Investing

Source: cnbc.com

Investing, on the other side, is separating funds into an asset that might make you money. When people invest in assets, such as stocks, they often expect returns and when the risks are higher, they expect higher returns.

Understandably, before investing, investors should know how much money “they’re ready to burn” (in the worst-case scenario). And the rule of thumb is for them to risk 3 to 5 percent of their capital. Some of the most experienced investors follow a well-known strategy called “Not putting all of your eggs into one basket” meaning spreading the funds into different assets. But, that’s not all… In order to increase their chances, even more, a lot of investors study trading patterns allowing them to anticipate what’s going to happen next.

Gambling vs. Investing: Key Differences

In Investing, as well as in gambling people try to increase the chances of maximizing the profits. The fact of the matter is that the house always has the advantage when we’re talking about gambling. And, history has shown that stocks, over the long run, always rise in value. Keep in mind that this doesn’t mean that the investor will always increase their capital… In fact, more often than not people lose money when investing, and people earn money when they gamble.

1. The Time Factor

Source: moneyandmarkets.com

The concept of time is another key difference between these two. If you invest your money, you won’t be seeing great returns in the near future, but if you’re a gambler your investments hold up until the end of the game. So, if the referee blows the end whistle, they’re also ending your chances of winning anything. But, time can be rewarding when you invest in a stock. Let’s say you’re buying a dividend-paying stock. So naturally the more you’re holding the stock, the better payout you’ll be getting, and the better the return on your initial investment.

2. Investing Involves Less Risk Than Gambling

If you lose money while gambling you can say goodbye to that money, meaning you lose what you put in, all at once. So, you’re risking all of your invested capital at once. But when you’re investing, you’ll lose or gain money slowly. This means that you can take your money out of one stock and put it into another one if you think that the second one might perform better at the moment. In investing you’ll never lose all of your invested money.

3. Getting Information

Source: wall-street.com

In investing as well as in gambling you are going to end up analyzing behavior either the market’s behavior or an individual’s behavior. This ability will improve your chances of multiplying your investment. The fact of the matter is, information is the most important thing in both of these worlds. However, there is a difference in the information availability.

4. Investing is based on Research, while gambling depends on luck

You can get information on investing and stocks on the internet from official sources. Company incomes and management teams can be easily researched, which is very helpful for making decisions, while on the other hand, when you sit at a table to gamble, you have no idea of what happened before you on that table, which many consider a huge drawback.

Gambling, compared to investing, is much more reliant on emotions. When you’re investing, research is the name of the game. You need to understand your financial situation, goals, and risk tolerance in order to invest in the right stock, while with gambling, you don’t need any research because emotion controls the market. Although there is still a thin line between gambling and investing, people often mistake them.

Source: odysseygroupwa.com

Conclusion

Besides the fact that people mistake gambling with investing, they are not the same. They may have many similarities, but a thin line differentiates them. Investing is a risk under uncertain conditions, and gambling is a risk under certainty. Investing hinges on knowledge, patience, and practice, while gambling hinges solely on luck.

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