Betminds
Casual Punter
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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:
Whats the difference between gambling and investing
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......
Whats the difference between gambling and investing
