Questions like "are stocks gambling?" have existed for the longest. It has been a debate among experts, investors, and gamblers about whether or not gambling is a form of investment and vice versa. Well, this is what we will tackle here.
Is stock investment gambling, and is gambling a form of investment? Is gambling just a waste of your money? This article will define gambling and investing and dive deeper into their similarities and differences.
Defining Gambling and Investing
To know whether or not investing is gambling, let's start by explaining the two's definitions.
Gambling, also known as wagering or betting, is the practice of putting stakes or anything of value on an event in hopes of winning and profiting. Some examples of its forms are:
- Casino table games
- Electronic games
- Sports betting
- Online betting
The amount of money one can profit from a betting event depends on the jackpot or pot money at stake. Meanwhile, the size of the jackpot is also dependent on multiple factors like the type of event, event size, number of players, ticket prices, casinos' or betting sites' policies, and more.
Unfortunately, the outcomes in gambling are uncertain as events are primarily games of chance, so they pose tremendous risks. However, there are still strategies that can help increase the odds of winning.
Gamblers who have been playing professionally for a long time are likely to have mastered betting and risk management. They are proficient in researching teams' history for sports betting and are also good at reading and interpreting patterns. Experienced card players know how to look for cues and mannerisms to predict their opponents' "hands" and subsequent moves.
Investing is the act of committing your resources, such as funds or capital, to purchase assets while expecting their value to increase over time so you can gain positive returns or profit (i.e., ROI).
According to research, several factors at play affect the decision of people to start investing, and it shows that most of these individuals have financial goals in mind. Investors aim to preserve their capital, generate extra income, or achieve growth or capital appreciation in their investments. Individuals are to venture into investing to save up for college and retirement funds.
There are several types of investments, including:
- Government bonds
- Corporate bonds
- Mutual funds
- Real estate
But one of the most common investments is buying stocks.
When you purchase a public company's stock, it means you're buying a small portion of the ownership shares of the said company, making you a shareholder. Investing in the stock market is most effective for capital appreciation, especially for long-term investors. However, since stock prices and value heavily rely on the company's performance, it still has risks that can cost you.
Key Differences Between Gambling and Investment
Now, comparing investment vs. gambling, here are their main differences:
Overall, the risks in investing are lower than in gambling.
When you invest, there is assurance that you can recover or withdraw your investment, despite the stocks plummeting. Investors can choose to switch to another fund or asset once they notice that stocks are dropping, and they can face potential loss. They can also have the option to place stop-loss orders with their brokers, which automatically sell their shares once the stock reaches a specific price or the stop price.
Meanwhile, there are only three outcomes in gambling - either you make money from playing blackjack, break even at video poker, or go home empty-handed after playing online slots. Unfortunately, the odds of losing from these events are significantly higher than the chance of winning prizes and earning some profit. And once you lose all the money in your bankroll, the only way to recover them is to find additional capital and keep gambling. At this point, you're already aware of how this scenario can potentially pose more risks and problems.
If you think of investment as gambling, those who are investing in stocks are betting to win while those who visit casinos are betting to risk.
Gambling is a short-term, time-bound event while investing is more long-term.
How long your investments in gambling can last depends on the game's duration. You either win the prize money or lose your wager in the end. Once someone else wins and the event is done, you lose your chance to profit from your bet or recover your capital. Take blackjack, for example. While the blackjack odds favor players who utilize basic strategies, they are still likely to lose when they play the game for an extensive period.
On the other hand, investing in stocks can last several years, depending on the market. Companies can reward their long-time shareholders with dividends or corporate profit in the form of stocks or cash. Gaining dividends is one of the best ways to profit significantly from your stock investments in the long run.
Gambling is mostly a game of chance while investing heavily relies on research.
Most events in casinos and other gambling establishments, like slots, roulettes, bingo, and more, are pure games of luck, which depend on a randomizing device. However, there are events like sports betting where you can use the information on the teams' and players' history to study and potentially predict the outcome. Additionally, card games like poker are considered a game of skill or advantage gambling. You can implement tactics based on your observations and experiences to increase your odds of winning.
In contrast, investing is more research-based. The more you know about the current stock market, the better your decisions. Fortunately, information on public companies and their stocks can be easily accessed by anyone. Before committing to an asset, investors study the company's earnings, financial situation, management, and risk tolerance.
How Gambling Can Become Investing
We know now that although gambling differs from investing, they still have similarities. Casino players and sports punters have long proven that you can make money through gambling despite the odds. With this, we can say that gambling can become an excellent way to invest your money and effectively gain profit. Here's how:
Professional gamblers are regular casino players who make consistent income in gambling. The profit they earn from playing can cover a huge fraction, if not all, of their living expenses. These pro players practice advantage gambling.
Advantage players typically play house-banked games like blackjack and other non-banked ones like poker. They use skills and knowledge to turn the edge in their favor.
One of the most common examples and the most straightforward tactic is card counting in blackjack. Card counters attempt to overcome the house edge by keeping track of the ratio of high to low cards by assigning values to the cards dealt. Based on their calculations, they will decide to raise or lower their bets.
It may sound easy, but card counting requires skills and practice. However, once you master this basic strategy, you will find it helpful to become a long-term advantage player successfully. Moreover, it is essential to remember that a handful of casinos ban card counters and those who win too much, so if you decide to use this strategy, you should also learn to blend with other players.
On the other hand, you are freer to apply advantage play in poker since you're up against other players instead of the house. However, becoming a long-term poker player is more challenging than card counting. It involves more strategies, including better guesswork. But once you're a pro, you can easily gain profit. Nowadays, a pro poker player can earn at least $40,000 per year up to $100,000.
Another form of gambling where you can become profitable in the long run is sports betting. Successful sports bettors or punters have built their reputation and expertise with a series of skills and traits. But take note that among other advantage plays, this is the hardest to learn.
First of all, any sports bettor who wants to have a chance of winning must have a strong knowledge of the sport - this one's just common sense. They must know every rule and factor affecting the game's outcome. Additionally, being well-versed in the sport's most notable players and wins in the past can also help them make educated wagers.
The second is that experienced sports bettors are analytical and great with numbers. Several data points come to play, including the teams' past performances and sportsbooks odds. The most skillful bettors can easily predict the outcome by looking at and interpreting the data. They must also know how to look at bet values, especially since sportsbooks constantly adjust.
A successful sports bettor is flexible. They know that sports betting is constantly changing as much as the teams' performances, and factors can instantly transform an outcome. In any case, one should know how to adapt in instances like these.
Overall, sports betting is the most complicated but the most rewarding. Sports punters are the most successful advantage players, with pros earning millions of dollars. Once you become a seasoned sports bettor, you can expect to earn from $50,000 to $150,000 every year.
So, is stocks gambling? With the idea that as you invest in the stock market, you're also risking your capital, yes, we can say that stocks are also gambling. The same goes with the question, "Is gambling a form of investment?". With the right skills, knowledge, and strategies, one can become a professional gambler and take advantage of the high returns from gambling.
This article was published on June 10, 2022, and last updated on October 20, 2022.