What is the Difference Between Gambling and Investing?
Because of this risk, it is still inherently a gamble. That will either prove to be a good move or a bad move. April 24, at 1: After taxes and the profit to the race track are deducted from the amount bet on the winning horses — the first, second and third finishers in the race — the remaining money is divided among the people who bet on these horses. For some reason it seems technical analysis is somewhat akin to ploppies' "seeing patterns" which may or may not actually exist In both gambling and investing, a key principle is to minimize risk while maximizing profits. If the company is profitable and issues dividends , you benefit financially.
ETFs and index funds are good ways to achieve diversification without a lot of trading. Pick ones that have a low expense ratio and other fees, and the level of volatility that's right for you. Stay away from leveraged ETFs as long-term trades. Funny thing about books on investing.
Some of them warn the reader that without the discipline to stick to their methods exactly you might as well be throwing money away at a casino. Most Interesting Man , May 18, Counting is not investing IMHO, counting is not comparable to investing. Counting requires devotion of an enormous amount of time, both in preparation and at the tables, and investing requires very little esp if you follow the good advice here and invest in index funds.
The question is not whether you can do better at counting than at passive investing. The question is, given your ability, BR and conditions, and accounting for your expenses, can you do better on average per hour counting than at some other use for your time - like a day job. For most people the answer is no, and that is certainly the case for me. I wonder about the full timers - what their earnings expectations are, their underlying calculations, their earning alternatives - what makes them tick.
Maybe in another thread. IMO, most "little guys" can't make money in the stock market these days, at least short term. It's a rigged game. Thanks for the advice everybody. Agreed that generally there's less labor in the stock market. So of course, this requires a lot of labor. Is their any analyst or fund who consistently beats the market? I believe most of the knowledgeable ones would say no. I trust the straightforward mathematics of BJ over the vagaries of economics and human behaviour.
Stock market is very much like thin assumptions built upon thin assumptions, over and over again. Have no faith in that. You won't get black swan events in BJ, you probably get them with unnerving frequency in stocks - of course that's the strategy used by some investors. Gamblor , May 18, But the favorite in each race only wins on an average one-third of the time.
In sports betting, a bettor has to put up an additional amount of money beyond the amount bet, which is kept by the "house. The so-called "point spread," the number of points a bettor has to give in any game — baseball, basketball, football, hockey, etc.
Even if a bettor wagers on a winning team, if the team does not win by more points given by the bettor, the bet is a loss for the player. Based on the facts cited above, gambling in general seems like a bad bet, and the gambler is at a disadvantage no matter how smart. Luck, the X-factor, may favor the gambler for a single bet or for a long, but ultimately temporary, run; luck is fickle and unpredictable.
Now, let's look at investing and how it differs from gambling. Investing When you gamble, you own nothing. When you invest in a stock, or a stock index fund , you own a share of the company or companies in which you invested.
If the company is profitable and issues dividends , you benefit financially. If the price of the stock or stocks you own goes up, you can sell at a profit. Although the stock market has fluctuated up and down over the decades, the general trend has been up.
Buy-and-hold stock market investors, therefore, have been rewarded with profits SEE: Well-chosen real estate investments, mainly residential housing, have also appreciated in value. So, despite periodic highs and lows, the stock market, U.
You can play soccer…for healthy and wealthy…at the same time one can play gambling while you are playing….. Do we say playing soccer is gambling? When gambling is concerned…. But when you invest in the stock market when you win……so win the others…when you lose..
It seems those of you who interpret the market as a form of gambling seem to ignore the broad-ranged implications of risk-tolerance levels. Any form of risk could be considered gambling, for by its very definition it is considered to be an investment with a certain level of potential for financial gain. Obviously a person does not make an investment to intentionally lose money. A person who invests money in treasury bonds a risk-aversive move is still assuming a slight degree of risk provided the government always has the ability to bankrupt itselt.
Because of this risk, it is still inherently a gamble. I are really glad that I stumbled upon this article and this chat. Now, playing the market IS nothing like playing on a roulette wheel. The game of roulette — when it is played with either just the zero or zero and double zero on the wheel — is heavily edged in favor of the house.
In other words, over the long pull the casino WILL win no matter what, as long as they pulled in customers. The same is true for the game of blackjack. The house has a small edge, and even playing basic strategy to perfection would be a losing strategy for any gambler. But here is the catch. Ed Thorpe who discovered the mathematics of blackjack developed what is probably the first card counting systems.
By using these legal systems, Thorpe found a way to reverse the edge. Now the counter had the edge, and over the long pull would win. He might not win at any given session at the table, but over time he was assured victory. Casinos, not the law, prevent counters from playing at the table. In the game of blackjack there are 52 variables. Probabilities of those combinations of those variables are calculable to any decimal point you desire — PERFECT strategy blackjack computers have been around since the 70s, when they were legal, and now I think the iPhone has a widget that plays perfect blackjack: With just the simple skills of exploiting knowledge of two variables — high and low — a player can become a blackjack professional, a player with an undeniably, mathematically sound strategy.
Yes, because any given hand could win or lose — what is required is a large set, a sufficient sample to show why his bank roll keeps getting fatter. But the fact also exists that there must be a few statistical aberrations, some poor bastards who despite the strategy are just losing players. What are the odds of being such a loser?
They are small when playing perfect strategy — so it is still a gamble. For that decision to bear positive fruit would require an unbelievable number of things to fall into place. There are more variables than can be counted, or calculated. In a single deck black-jack game there are always 52 variables. In global economics there are more factors than can be imagined. Diversify you portfolio 20 or more diverse investments and go for growth long term.
How is this gambling? This was well explained above by someone earlier. Hey guys; I am admittingly a recreational gambler and enjoy a day at the casino. Therefore, higher risk, higher potential gain or loss. Personally, I tend to win more than I lose at the casinos and lose more than I win at the stock market.
I look at my K for the past 10 years and the appreciation is absolutely dismal. I know that financial planners will never recommend that people throw down all their money at the casinos but in reality on a short term basis there is much higher potential for gain in gambling. If everyone knows that that it is a great company, the valuation of the stock is already reflected by that fact.
Remember stock investing The two markets are fundamentally the same, with some minor differences. People bring new money to the market all the time Investing a portion of wages, reinvesting dividends, selling private holdings, etc.
I suggest taking them to an online forum where your questions can get more visibility and perhaps someone will say something that clicks better. Keep with it, and the picture will come into focus. Dylan — On the first point we are talking about the same thing. Every new buyer or seller moves the market, it just might not be by a whole penny. As for the second point, at some juncture I thought the conversation turned to the whole market. Zero sum, like you said earlier. So I guess my whole house of cards concern comes from the worry that at some point it becomes more difficult to attract new investors, and growth comes to a halt.
The buyers and sellers already exist, they just have to agree on a price.