Is investing the same as gambling? Which investing style suits your needs? Both involve some level of risk, and sometimes they can be thought to be similar. However, in reality, they are quite different. Typically, investing lasts a lifetime, while gambling is short-lived.
To help you decide the best place to put your capital this piece tackles the key differences between these two options. Keep reading to learn more.
Risk involved
Investing and gambling involve some level of risk. However, with investing, the level of risk can be reduced by diversifying your portfolio and spreading your capital across different asset classes such as real estate, stocks, and equities. That way, when one asset class is exposed to risk, the others help minimize the potential losses.
That is not the case when it comes to gambling. Risk cannot be spread, and that puts your entire capital in jeopardy. All of it is exposed to risk.
Different frames of viability
In investing, you have to wait for a specific period before you start receiving your investment gains. Some asset classes will pay off earlier than others, and there is nothing wrong with that. Generally, long term investors are willing to take on more risk for higher rewards than short term investors.
To be sure about the nature of rewards to expect, it is important to ensure you have complete information on all potential investment options. This is because both short-term investments and long-term investments reward differently and at different times.
Your investment can also become an alternative income stream — for example, when you start receiving monthly interest payments. Not to mention you could also benefit from capital gains.
Gambling is a one-off event. You place a bet and expect to have your gains immediately after the event. And please don't confuse short-term investing with gambling. They share some similarities but aren't the same thing.
Besides, the gains of a gambler come in a lump sum. Once you get the initial gain, that is all — no further income stream as it is with investment.
Game of chances
Gambling is a game of chances. You can win or lose, and the possibilities of losing are always high if not careful. That increases the level of risk as you don't know what tactics your opponent will use. Essentially, to win in gambling, you must remain focused and, most importantly, be ready to act first.
With investing, the chances of all parties winning are higher. For example, if stocks in a certain exchange increase, all investors receive capital gains. The best thing with investing is that you aren't forced to focus on the other investors' move to gain. You only need to remain focused on your strategies.
Access to key information
With investing, you have access to all information you need to make an investment decision. Information on the various types of investment is easily accessible, and you can use it to establish future performance and gain insights on which investment option is most appropriate. This privilege to access this information makes it easier to reduce the uncertainty and mitigate risks surrounding investing.
Meanwhile, with gambling, there is little information out there to count on. This is because gambling agencies aren't allowed to reveal any information to you. Just walk into any casino near you and try to gather information. Often you will have access to the general information, which means you go in blind hoping for the best. You won't know what happened an hour, a week, or a month ago to be able to make a sound decision.
Bottom line
Both investing and gambling have the possibility of risk and win. However, investing is a less risky option as it allows you to diversify hence minimizing loss. On the other hand, gambling is a game of chances— you rely on luck.
For that reason, you are better off choosing an option that doesn't force you to rely on luck. Need help to get started on the right foot? You can
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