Investing vs Gambling

Investing, is it a gamble or a calculated play with fate?

Many people equate Investing in the stock market to Gambling, this is a wrong view that causes a number of individuals to miss out on the returns of sensible investment. Let's look at some of the differences.

Business vs Entertainment

When you invest in a company on the stock market, you take an ownership stake in the business (share or stock), if the business makes money, you make money, if the business loses money, you lose money. Gambling on the other hand is Entertainment, there is no ownership, you simply transact with the casino with no say in how the game is run.

Is outcome Binary?

Whether it's roulette, casino wars, blackjack or poker, the outcome in gambling is binary, meaning, you either win or lose, and there is no chance of recovering the lost money without playing the game again. Investing is nothing like that; your returns from investment are a direct function of the underlying business. In good times the business makes money, it bad times it loses money. Money that is gained or lost in a stock market doesn't just disappear like in a game of chance.

Is Analysis Required?

Gambling requires little or no analysis at all. Investing on the other hand requires extensive analysis, planning, logical assumptions and capital.

Wealth Creation vs Wealth Transfer

Gambling is a zero sum game. What you lose is someone else's gain, thus gambling simply transfers money from the loser to the winner. Investing creates money for the majority and your gain/loss does not have to come at the expense of someone else’s loss or gain.

Instant Gratification vs Delayed Gratification

Good Investment returns require patience, gambling on the other hand has instant results.

In conclusion, Investing is certainly not gambling, Gambling is a no-win affair, investing gives you a reasonable opportunity of making returns, gambling may be a lot more exciting than long-term investing, but only one provides the positive returns you would need to help you in meeting your financial goals.