Isn't investing just gambling?

[gobbleitall]

Isn't it just taking calculated risks like you do when you play poker? You can improve your chances but it's essentially still gambling right?

[curvedcast913]

Yes and No. My house is an investment. But, if the value of the house drops, it doesn't entirely disappear.

[pegasusaig]

Gambling is pure chance. If you are an unskilled investor and do not know how to research your investments or use good financial judgment, you are indeed gambling.

Gambling in terms of any casino play always has the gambler in a position of negative advantage; the odds are invariably against them. Not so in the market. The odds on investing success depend mostly on the skill of the investor; they are not predetermined by the game.

Few people have gotten rich gambling, unless they owned the casino. Huge numbers have gotten rich investing. I'm one of them.

[Joe]

Certainly investing can be gambling, particularly if you put a lot of money in risky stocks like Facebook. However I try to decrease the gambling aspect as much as possible by spreading my money out over more than 6,000 stocks both domestic and foreign. I buy index funds at Vanguard,com to do this. I invest for the long haul, and there has never been a 20 year period that the stock market has lost money, even after correcting for inflation. Even during the great Depression, if you held for 14.5 years, you got your money back, provided you were properly diversified.

However most of the time stocks go up. They have averaged about 10% a year for the last 210 years. If you correct for inflation, the average return is about 7%. The odds are heavily in your favor if you hold out for the long term.

Of course, maybe sometime in the future, there may be a 20 year period where stocks lose money. There also maybe runaway inflation, and the money you save up in a "safe" bank account may be wiped out. Even if you are a scared of stocks, I think it is reasonable to consider putting 10%-20% of your money in an IRA at Vanguard invested in the Total Stock Market Index Fund. It is likely to be worth a whole lot more when you retire.

I may point out that many things in life are a gamble. For instance, you borrow money for college, gambling that you will make enough when you graduate to pay off the loans. This is a gamble that pays off most of the time. Similarly the stock market is a gamble that pays off most of the time, provided you are diversified and investing long term.

[Lana]

NO. With gambling, you are playing against other players or the House (Casino). It is a zero-sum game. If you win, someone else has to lose.

Companies, on the other hand, can actually create real value for shareholders. As share prices rise, value can be created for all shareholders. Apple, for example, going from $7 to $600. Everyone who owns it has increased their value. Now, shareholders who sold at $10 per share do not like it, but they have not actually LOST money as the value increased. That is the main difference. Investing is not a zero-sum game because actual value can be created. 5i Research Inc. has several interesting free articles on its website discussing several general investment themes.

[i like turtles]

If you see it as gambling then you are not a great investor. Yes, sometimes investments are speculative and that is gambling. But pro investors will use hedges and options to offset their risk and only invest in things they know.

[Eddie W]

No, in gambling, the final of the game is governed by a rule, either by a pre-determined outcome or time. The reward has also been pre-determined by either an odd or a method of calculation.

For example, horse racing, lottery, football game, poker etc. When a horse reaches the end line, when the numbers have been casted, when the final whistle blown, When a player flips open his cards, the game is ended.

In stock investment, there is no pre-determined rules. Every step along it's course is determined by your own decision. You can choose to add more, sell all, sell part of it, sell and buy them back etc. Whether the stock falls or rises, you have full control according to your own decision.

Some investments are more price-sensitive, stock is the most typical. Whereas properties, business, buy /sell commodities are much less price sensitive.

[David]

Don't forget to use the Search Y! Answers search box (just type “gambling and investing”). This question is asked often here and widely misunderstood, but only by those who know little about the markets and trading.

But trading is a vocation, and like any vocation, it takes hard work, lots of study, and the testing of your theories, learning what makes you tick, learning your own particular time and stress levels. People looking for the magic formula or a crystal ball or the pot of gold (get-rich-quick schemes) will find that Day Trading or Technical Analysis is too much work. It is so much easier to simply Buy & Hope or gamble and rely on luck.

Gambling and luck are completely useless in preparation for life, comfort, peace, happiness, success and retirement. Only through investing, not gambling, can you utilize your God-given resources and concentrate on things that are true, honest, just, pure, lovely and of good report, and if there be any praise, think of virtue to further your goals. But it seems many people don't have proper goals any more than they have a proper trading plan, and insist on being gamblers wherever they go, whatever they do. You can gamble on anything.

One of the most important Samurai texts ever written, by Miyamoto Musashi, “The Book of the Five Rings (1643)”, offers this advice: “Think of what is right and true. Learn to see everything accurately. Become aware of what is not obvious. Be careful even in small matters. Do not do anything useless.”

Gambling is useless entertainment, while investing furthers our goals. There can be no great success in trading (life) without great commitment, hard work, discipline, and the realization of the “right” type of thinking.

Approached as a gambler with only chance and luck and a TV and a newspaper to guide him, trading or even “investing” is very similar to gambling or betting on a horse race.

But by the Trader's definition of trading, there is no comparison. Traders focus on risk control and money management. Gamblers rely on chance, roll the dice and hope. Traders are buying and selling an asset, gamblers hope on nothing.

Timing is critical to the Day Trader,. It's vital that he pay attention to multiple sources of information, sift through them, prioritize each separate piece, and make an astute decision once all information has been scrutinized, and depending on the time frame or volatility, this may need to be done every few seconds or minutes. You place your bet and hope with gambling, but this evaluation process goes on all day long with trading. Most beginners don’t realize that a trader focuses on risk. We manage and control risk; rather than traders, you could call us professional risk managers and be more accurate. By trading at support or resistance or a Fibonacci number or at a trend line or buy on a pullback, we have reduced our risk and tipped the odds in our favor. With gambling, you have no control over anything, and the house odds are always against you.

You can't be distracted and unfocused while formulating a trading plan or monitoring an ongoing trade. With gambling, you can do drugs and drink and entertain your woman and party at the same time, because there really is no intelligence being processed. Any idiot, whom has chosen to be ignorant, can be a gambler; no study required. Anyone who invests without first reading a few books is simply being foolish.

We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved, like a gambler. We do not rely on luck.

by definition:
Investopedia explains Investing
Investing is the key to building wealth, but investing in and of itself is not enough. You have to invest wisely!

When you place a bet on a casino game, you are actually buying a “chance or opportunity”. It is an intangible product.
When you invest in stocks, you are investing in the business. You are investing into a tangible product or business.

Gambling is a type of entertainment. Nobody in their right mind will use gambling as a means to a better financial future (there are always exceptions, but very few). Why? Because over the long-term, the casino always wins (in general). There is nothing for the gambler to own here.

Investing in stock is a good way to build up your personal wealth. It is a great tool to offset inflation. Over the long-term, your investment will appreciate and at the same time you also earn dividend income from your stocks (from assets and things that you own).

A true investor will have a plan. They enter and exit the market based on the prospect of the stock over the long-term. This makes them less vulnerable to short-term fluctuations, hence reducing the gambling element.

[kelby7670]

You can look at it that way. However, with gambling, the odds are always slightly against you. With the stock market you have favorable odds of maybe 7% over the long run.

[Andrew]

One of the father's of modern day security analysis said "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

I guess you can think of it as gambling. But it's gambling where you can change the odds the more you know. But if you're going to call investing gambling, you could call almost anything gambling. There's risk in everything.