0
Posted April 14, 2014 by John Baintree in News
 
 

What is the Difference Between Gambling and Investing?

cash
cash

Perhaps a dictionary definition is a good place to start with this often asked question. Random House define the verb gamble as “To play at any game of chance for stakes. To stake or risk money, or anything of value, on the outcome of something involving chance” while invest is given as “To put money to use, by purchase or expenditure, in something offering profitable returns” which seems to put the issue beyond any further debate.

Take a closer look and you find that the difference is not as clear cut as was first thought. Try switching the definitions and you find they work equally well. So perhaps we need to examine some frequently held perceptions about the two to find a way of differentiating. Some factors to use as differentiators are discussed below.

Good vs.Bad – looking generally at social values there is a clear distinction between the two, investing is seen as a worthwhile activity while gambling is thought of as having a less than wholesome value. Possible this is because investment is seen as the means by which wealth and employment are created leading to the good of all whereas gambling is an activity that even when successful only benefits a single individual.

Odds in your favour or odds against you – if an investment is considered, the odds of being successful are stacked in your favour, otherwise why would you invest. With gambling, on the other hand, the odds are categorically against you and in casino gambling, the house declares how much it intends to stack the odds in its own favour.

Addiction and destruction – two attributes that can readily be applied to gambling but less so with investing. A considered investment is not guaranteed to provide a return, but the chances are definitely in the favour of the investor if they have done their homework correctly. Gambling expressly carries risk and it is the experiencing of that risk that leads to addiction and ultimately destruction.

Entertainment vs. business – other than in the case of a few professional gamblers, investing is about business while gambling is about pleasure. Traditional lines between entertainment and business are becoming blurred with the availability of cheap to use, online trading platforms. Individuals can play the stock market for themselves, accessing the volumes of published data about organisations and placing their own bets in the form of share acquisitions and disposals.