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Whats the difference between gambling and investing?

Betminds

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This series is a great read if you get time in-between all the Euro2016 madness :) Discussed is portfolio theory, finding value and the psychology of gambling......


So just what is the difference between gambling and investing, is it really so easy to split the two activities apart?

The Dictionary.com web site says:

  • Gamble: "To bet on an uncertain outcome, as of a contest. To take a risk in the hope of gaining an advantage or a benefit."
  • Invest: "To commit money or capital in order to gain a financial return."


    To put simply, the difference is unclear. Both involve risking money for potential financial gain.

    An argument could be made that gambling is a zero sum game where as an investment is not. In gambling for every winner there must be a loser, whereas investing can benefit both the individual and society in general. Investing is widely regarded as the engine that drives capitalism. It tends to put money in the hands of those with the most promising and productive uses for it, and drives the economy gradually upward. Investors aren't merely betting on which companies will succeed, they're providing the capital those companies need to accomplish their goals.

    All of this is true and would have stayed so, if it hadn’t of been for one thing – derivatives. Derivatives began to proliferate in the 1980s, they are investments 'derived' from other investments. The financial world have made these purposefully as complex as possible and many who work in the financial sector cannot succinctly define what a derivative actually is, so let me do it for them, a derivative is a bet that something will go up or down, that’s it. As an example, if you hold an equity derivative you don’t own part of the company, you’re not investing in its future, instead you are merely betting whether its share price will go up or down. The notional amount of outstanding over-the-counter derivatives contracts remaining in June 2015 was $553tn according to the Financial Times...... that’s a whole lot of betting.

    Even in the modern financial world, gambling is still generally looked down upon by society. Trading on the other hand is seen as an activity that is worthy, smart and an investment in ones future. It’s the accepted view of the majority that gambling is a mugs game, where the odds are against you, that it’s for risk seekers using luck and emotion rather than skill to try and earn a buck. Lastly as the old cliche goes, the house always wins.

    But what if this all wasn’t true, what if the distinction between trading and gambling was lazy and simplistic, what if you could make risk averse well informed decisions to make money gambling and what if the gambler remained disciplined in his or her decision making. There are many ‘gamblers’ out there already doing this and they are as savvy as any investor. Gambling, if handled sensibly, can be a very sound investment approach, and a viable alternative to traditional investment philosophies......
More here....
Whats the difference between gambling and investing
 

LeBlanc

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Great article, very thoughtful. The subject is disclosed broadly and clearly
 

Drea777

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I think there is a risk for betting and for investing as well
 

Betminds

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I think there is a risk for betting and for investing as well

Absolutely, like any investment vehicle, the value of your investment may go up or down
 

Betting Forum

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The best investment was bitcoin which is now more than 1000 times more expensive than it was few years ago. Imagine buying 1000 bitcoins for cents before and converting it now.
In betting this kind of thing is also possible, in betfair when someone is loosing really hard and he was also the underdog before this I have seen odds of 1000. So you can also make money like this but its going to involve a lot of luck as to when to place abet and on who to rely.
For me both investing and sports betting is investment, sports betting usually short term investment.
 

Betminds

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Yes annoyingly I used to purchase bitcoins but purely in the short term to buy things with, would have been worth a fortune if I had just sat on them.....It's not the first decentralised digital currency to launch tho the odds were against it, however it looks like it's here to stay now.

Shame no one told this guy :)
https://www.theguardian.com/technology/2013/nov/27/hard-drive-bitcoin-landfill-site

And there is no way to recover this bitcoins from the hard disk? I dont quite understand it, thats why I chose wallet in website.
 

Vilma Young

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Gambling and investing are not related but gambling is kind of investing. In investing Surly we can say that we can get our invested money back but in gambling we can't say surly that we can get our money back. That's the main difference in gambling and investing. :)
 

Miriphyc

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sometims in order to avoid betting i can say that i am investing - it sounds better for my ears at least; but for my wife it is the same o_O
 

JohnSup

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Peter Lynch said “An investment is simply a gamble in which you have managed to tilt the odds in your favour”. What do you think about that?
 
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