According to the Cambridge Dictionary, a gambler is “a person who risks losing money in the hope of winning a lot more money.”
An investor, on the other hand, is defined as “a person who puts money into something in order to make a profit.”
Several pots on the boil
One of the biggest differences between investing and gambling is diversification. Investing allows you to spread your risk across all asset classes and geographic regions. Gamblers, on the other hand, throw their capital into a single pot on a wing and a prayer.
As an investor, you can avoid losing everything by selling when you need to, or when you believe it’s a sound investment decision. Gamblers can’t stop their losses on a bet and get some cash back. This is because investing is based on owning something tangible and gambling isn’t.
Slow and steady wins the race
When investing with professionals, the odds are in your favour – provided you’re in it for the long haul. When you’re gambling, however, the house almost always wins.
Investment professionals like us have the expertise, time and analytical tools to pore over the past performance of any given investment opportunity. And we use this information – coupled with the irresistible power of diversification – to increase your odds of winning in the long run.
But when you play blackjack at Grand West, you can’t use research to increase your chances of success. You may hear that the table is either ‘hot’ or ‘cold’ – but that has no bearing on what will happen when you start playing.
Another big difference between investing and gambling is TIME. With gambling, your chance to profit ends as soon as your hand is over. With investing, every day is a new opportunity to make a profit.
So they’re completely different, then?
Not so fast. There are also some pretty big similarities between investing and gambling. The biggest being the fact that you need to take on some risk in both. The thing is, (good) investors tend to avoid risk unless they’re well compensated for assuming it, while gamblers often take on short term risk which they mostly can’t afford.
That said, it is very possible to approach investing with a gambler’s mentality. Day trading (buying and selling shares, Bitcoin or other instruments every few days) is really a form of gambling. While it’s possible to enjoy a few wins this way, they’ll never compare to the returns you get from true investment.
Tread with caution
As your financial advisors we urge you not to fall into the trap of gambling under the pretext of investing. These days we can all buy and sell shares with a few thumb swipes … But this doesn’t change the fact that true investing is all about diversification, time in the market and balancing risk and reward.
Unless you’re prepared to put in the time and effort that true investing requires, you’re probably better off investing time into developing your own skillset and leaving your investment portfolio to us. As the legendary economist John Maynard Keynes said, “It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of stock exchanges.”
If you have absolutely any questions about your long-term investment strategy, don’t hesitate to contact us.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.