Difference Between Investment And Gambling In Tabular Form
- Difference Between Investment Speculation And Gambling In Tabular Form
- Difference Between Investment And Gambling In Tabular Form Pdf
Gambling, on the other hand, is a wager between two parties that depends on a particular outcome and results in a gain for one, and a total loss for the other. So essentially, the biggest difference between investing and gambling, is that when you invest your money, you are purchasing something of value. Difference Between Investing and Gambling. Some people confuse investing with gambling. This is one good reason it’s important to differentiate and compartmentalize saving, investing, and gambling. Most gambling involves risking capital and dividing a fixed amount among winners and losers based on chance. 38 The Gambling Culture Differences between gambling anD investing In its simplest form, gambling is when a person gives money specifically for the mere chance of receiving more money. Chance is the probability that a particular outcome will occur—e.g., on a spinning roulette wheel, how. Part of the confusion between investing and gambling, however, may come from the way some people use investment vehicles. For example, it could be argued that buying a stock based on a ‘hot tip’ is essentially the same as placing a bet at a casino. The argument basically maintains that the difference between investment and gambling is the fact (and it is, admittedly, a fact) that a smart investor acting on the best possible information has a significant “edge” over the gambler. That’s not a distinction between gambling and investing, though.
Your approach determines whether you are investor, speculator or Gambler?
Most of the people who are participating in different asset classes like Equities, Commodities , Real estate or other asset classes don’t understand whether they are actually investor, speculator or gambler. It is very important to understand your own behavior as an investor because that will determine your success as an investor. People who create positions in Futures and options also believe that they are investing in futures but actually that is speculation. So it is very important to understand the difference between Investment, speculation and gambling.
Following chart will clarify the how investment and speculation are different.
From above chart it is very clear that investor and speculators have different approaches towards different asset classes like equity, bonds etc. Taking positions in Futures & Options or commodities for high returns over short term are the ways to speculate and investing in shares and mutual funds or buying Gold through ETF with a reasonable return expectation over long term are ways to invest in these asset classes. Now let us understand what is Gambling?
What is Gambling ?
Gambling is fundamentally different from investment and speculation in following respects.
Quick Outcome: Normally Outcome of gambling is know very quickly. The outcome of rolling a dice or the turn of a dice is almost known quickly.
Results don’t depend on Economic activity: Normally results of gambling are not dependent on any economic activity. For example when you create position in futures or commodities the prices of stocks or commodities are some where dependent upon economic activity but when you play card and bet on that the outcome of that doesn’t depend upon any economic activity.
Lack of significant Economic benefit: Generally gambling doesn’t provide significant economic outcome. Whereas, investment and speculation can provide significant economic outcome.
Gambling should be for fun : Normally rational people do gambling for fun and not for making money.
So it is clear that gambling should be more done for fun and not for making money.
Investor or Speculator: Who are you?
Now identify yourself whether you are Investor or Speculator?, from your approach towards investments. If you invest with a very short horizon, without looking at fundamental aspects and have a very high return expectation then actually you are a speculator and not an investor.
Your approach and not instruments only decide whether you are investor or speculator : it is not necessary that if you are investing in shares and stocks then you are an investor, because If you don’t look at fundamental aspects of companies and have a very high return expectation over very short period of time then actually you are an speculator and not an investor.
Get ready for the risk and return or change your approach : If your approach is that of speculator and you want to remain the same, you should be ready for risk and return of the same. You may make heavy profits in short term with a little investment and you may also lose your capital within short term. Whereas in case if you adopt an approach of investor, you may make reasonable returns but relatively you are in much safer position.
Conclusion: To conclude with, there is significant difference in the approach of an investor and speculator. Speculator may make very good returns over a short term period once or twice, but over long term a speculator normally loses or doesn’t make much returns. So it is better to control your greed factor and become investor.
Comments
comments
Can you explain the difference between gambling and investing? Thanks in advance.
Thank you for your e-mail and question about the differences between gambling and investing. There are a number of Christian authors who have addressed this issue (Norm Geisler, Tony Evans, Gary North, etc.).
Briefly let me say that there are some similarities, and there are people who get addicted to high risk investing just like gambling. So I would acknowledge there are some similarities between the two.
But the key issue is that there are some striking differences. Investors research an investment with the goal of lowering the risks and making a wise investment. Gambling is all about risk and the odds cannot be lowered by further research (except for those who can modify the odds of blackjack by card counting or something like that).
The goal of investing is to build up a company and portfolio. Even if it’s done selfishly, it still can have a positive effect on the company and the economy. Gambling takes money out of the capital economy. It doesn’t contribute to job creation, etc. As I argue in my transcript on gambling, gambling actually hurts a local economy and increases social costs (abuse, neglect, bankruptcy).
Most investing is done with discretionary income and with certain limits (amount of stock that can be bought on margin, debt load allowed by a lender, etc.). Most gambling is not done with discretionary income. Money that should go for food, rent, clothing is often risked in a “get-rich-quick” scheme.
So while I would acknowledge that investing and gambling have some similarities, the differences make the difference. If you are interested, I would encourage you to read some additional material by some of the authors I mentioned.
Thanks for writing.
Difference Between Investment Speculation And Gambling In Tabular Form
Kerby Anderson
Probe Ministries
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