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A Closer Look into How Investing Could Sometimes Seem Like Gambling with Money
There is a popular belief that has been doing the rounds for quite some time. Investing is similar to gambling. Does that mean that you play cards to predict the rise and fall of stocks? Does that mean that if you win a hand at Poker, you could have some decent stocks to your name? No, that is not what we mean when we say investing is akin to gambling; not by a long shot.
What we are trying to say here is that investing in stocks could be a risky affair. More often than not, even seasoned investors fail to make accurate predictions. That is why we say that investing is more of a gamble.
There are intrinsic risks in investing, just as gambling. Speculations work quite a lot, but one cannot pin all hopes on the same. That is why investing and gambling shares a common ground.
Having said that, let us now move on to learning a bit more about the similarities and differences between the two activities. However, before that, let us look at the two concepts separately.
Investing: In a Nutshell
Simply put, investing is the process of allocating funds to an asset and expecting favorable returns from the same. The process has risks associated with it. However, the promise of lucrative returns makes it worth it.
However, one must not forget that investing in assets do not always promise returns. You might also end up losing significant amounts of money. However, deploying the right mathematical skills and speculations might just do the trick.
Investments are of various types. Mutual funds, bonds, other assets like gold and land, are all different types of investments. Each of these types has its own perks and features. With the right investment strategies, one could easily climb up the ladder of success.
Gambling: In a Nutshell
Let us now have a look at what gambling means, as an independent concept. Gambling is basically an activity taken up for entertainment. The outcomes of the activity are heavily dependent on chances and involve risking a significant amount of money.
Gambling is also known as betting or wagering. Poker, Blackjack, Slots, Video Poker, Sports Betting and the like are all different forms of gambling. Gambling also has risks of its own, and this is where it shares a common ground with investing.
Gamblers, like investors, must carefully calculate the odds, be aware of what is happening and only then proceed. Though gambling depends on chance, certain calculations can tweak the chances of winning.
The Differences Between Investing and Gambling:
Having discussed at length about the two separate concepts, it is now time to discuss the differences between the two.
In Mitigating the Losses
Gambling and investing, both involve risks and losing out on money. However, there is a key difference in how the two domains mitigate the losses. Simply put, gambling has no specific loss-mitigation strategy.
However, this is not the same with investing. Investors have carefully planned strategies that can help prevent total loss of risked capital.
The Factor of Time
The second difference between investing and gambling is that of the amount of time taken to go about the two events. Gambling has constraints of time. This means that gamblers can visit the casinos or play online on https://www.usafriendlypokersites.com/ for a specific amount of time.
However, investments do not have any such constraints. It could last for months or years. With gambling, you win the profit or lose the same once with every game. However, with investment, profits and losses are an ongoing concept. It is a continuous process.
The third and the final difference that we shall be talking about is that of information. Gamblers do not have much information on which they can base their present game. They could look into the past outcomes, but that does not help much.
However, with investment, people have access to a world of information. That is what makes investments a more structured process. Calculations and speculations can be made in a more organized and structured manner.
Gambling does not have such scopes. Whatever information one might have in gambling is not quantifiable.
There are some key similarities, as well as differences when it comes to gambling and investing. Both the events have associated risks, and both of them have a scope of making profits.
However, there are also some very noticeable differences, as we have discussed in the points in the article.
Therefore, though we might say that investing is a bit like gambling, there is no reason to think that the terms can be used interchangeably. Investing does have risks of losing out on money.
However, structured calculations can be made while investing, unlike gambling. This makes investing a more organized process and gambling, purely a matter of chance.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes