Investing and Gambling Are Not the Same

Investing and gambling both have the potential to make you rich. But, they are most definitely not the same.

When gambling, it is possible to have some kind of system or strategy for certain games like Blackjack and craps in The Casino Wizard to win. Others, such as the slot machines, are based completely on odds or luck, if you will. The odds are stacked against you, though, as this is where casinos make two thirds of their profits.

As far as playing the lottery, financial experts across the board can agree that your time and money can be better spent elsewhere. Your exact odds depend upon a number of factors, but unless you are willing to sit down and do some math, you could end up wasting a lot of time (and dollars) on all those lottery tickets.

Dictionary.com defines gambling as “the activity of playing at a game of chance for money or other stakes.” It also states it as “the act of risking the loss on something important by taking a chance or acting recklessly.” One may argue the second definition may define investing, but we are going to explain why it doesn’t and ways to avoid making risky mistakes.

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Investing is not a one-and-done deal

One of the most important things to keep in mind with investing is that it is not a “get rich quick” scheme. In fact, it is not a scheme at all. If you go into your investments without a strategy, then, yes, you are putting your finances at risk. You need to nurture your investments and pay attention to them. You also need to realize that they do take time, and they won’t make you rich overnight.

Researching companies and having patience are two traits that will be your best friends for successful investing.

Practice makes perfect

Gambling is meant to be entertaining while investing serves the purpose of creating wealth. It may not be fun, but it is a great way to enhance your finances. Of course, this is not one of those “if you build it it will come” deals. You need to put yourself out there and gain some experience.

If you have little to no experience in the stock market, the easy and short answer is to simply consult with a professional; but, this may not always be a viable option, and you still need to find someone you can trust to point you in the the right direction. The only way to ever really become experienced is to actually get started. In the beginning, after you’ve done some research on companies whose performances you may like, note the time and date you began looking at them. Then, watch their performance over a period of time and test yourself on how well you were able to pick and choose good stock. Once you get a taste, you can try actually putting some money in.

You shouldn’t jump the gun

There may be times when you begin to see your stock numbers drop, and your initial reaction may be to jump. This is not always the best thing to do. In fact, billionaire Warren Buffet is a strong believe of the buy-and-hold strategy. (Watch below.)

Seemingly in recent years, the buy-and-hold strategy has been dying. In 2011, the stock market even saw the biggest drop-off of investors it had since 1999, according to the Gallup Poll. But stocks take time to grow, and the market fluctuates frequently. There are definitely moments where buying and selling frequently can actually create more of a loss for you than if you just held on for a while longer. Of course, research will help you make these decisions.

Don’t get too discouraged

You won’t always make the right decisions when investing in stock. It is likely you will experience losses, both big and small, but don’t let this discourage you from investing. Through your mistakes, you’ll learn some of your own do’s and don’ts. Be deliberate in your decisions but also don’t allow emotions to get in the way. Avoid making your decisions in the heat of a moment. Also, don’t waste too much time regretting decisions you should have made or a bad trade. This happens to the best of us.

Over time, you’ll learn what stocks are better than others and which you should try to steer clear from, such as penny stocks, which are low cost but often high risk. Many investors avoid penny stocks, but conversely, they can also be an interesting way to learn the market.

Diversify your portfolio

Don’t put your eggs in one basket. Look at different industries and markets in which to invest but also keep in mind the stock market should only be one aspect of your overall investment strategy. You should try to have liquid assets in an emergency fund as well, especially in the case that something should go terribly awry.

Investing and gambling may both come with risk, but investing is only gambling if you act recklessly. Pay attention to where your money is going. Anyone can participate in both activities, regardless of financial backgrounds; however, investing is the wiser option when wanting to actually build long-term wealth.

What are your thoughts on the topic of investing and gambling? Join the conversation in the forums.

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