Investing vs Gambling

15 June, 2024 / Articles

Gambling is not a healthy habit, and it is high time individuals recognized this. Gambling doesn’t allow you to plan and direct your funds appropriately especially when it’s an addiction. To turn this around, one should consider investing, particularly so that you can secure a future for yourself. There are many investment opportunities such as stocks, fixed income securities, and collective investment schemes such as money market funds which will give you a return while preserving your capital. However, the question remains, isn’t investing the same as gambling?

Not exactly.

Investing and gambling both include some level of risk which the involved parties choose to accept. For this reason, the two are sometimes thought to be similar. However, in reality, they are quite different.

Firstly, the element of risk is presented differently. Case in point, with investing the level of risk can be reduced by diversifying your portfolio and spreading your funds across various asset classes such as equities, real estate, and fixed income. This way, when one of the asset classes is exposed to risk, the others will dilute the amount of loss that is expected as only a percentage of the funds are impacted and not the entire capital base. On the other hand, gambling risk cannot be spread which puts one’s entire funds in jeopardy.

Similarly, access to information is different. In investments, you have access to all the information needed to make an investment decision. This lets you analyze the various types of investments, and you can use historical data to establish a trend project's future performance. This privilege allows you to find ways to mitigate risk as well as reduce the uncertainty surrounding investing. Meanwhile, with gambling, the gambling agencies are not required to disclose any information to you, which forces you to go in blind hoping for the best but preparing for the worst.

Moreover, investing and gambling have different time frames of viability. For instance, once invested, you have to wait a certain period before you begin receiving gains from the investment. It can also become an alternative income stream, which you can receive as monthly interest payments. You can also benefit from capital gains as in the case of equities. On the other hand, gambling is a one-off event where you make a bet and expect to receive the gains immediately after the event. Furthermore, the gains of a gambler come in lump sum whereby there will be no income stream after the initial gain.

Besides, gambling is a zero-sum game where you are always playing against the house or a fellow player and one has to lose for the other to win. This increases the level of risk as you do not know what tactics your opponent will use especially if it is a casino, therefore, your wins are mostly out of luck. On the other hand, with investing, all parties can win wherein the case of stocks all stocks in a certain exchange can increase in price rewarding investors of various companies with capital gains. Therefore, you are not forced to anticipate the move of other investors and you can focus on your strategies.

In conclusion, both investing and gambling have a possibility of risk and wins but where investing allows you a choice of what will happen to your funds, gambling is a game of chance. Therefore, you would be better off choosing an option that discloses information on the expected outcome than one that relies on luck. To control the gambling addiction, consider signing up for a personal finance class.

RECENT BLOGS
Interview: Victor B. Ondiwo on Cytonn Young Leaders Program

Cytonn Young Leaders Programme (CYLP) is an intensive 12-week training and mentorship program which seeks to provide the vital work experience to fresh graduates just joining the job market. The pr...

Mortgage 101

A mortgage also known as a lien is a debt instrument usually secured against a collateral of a real estate nature. Payments made to offset mortgages are usually predetermined. Failure to commit to...

Factors to Consider When Investing in Real Estate

Real Estate is a dynamic sector that has proven to provide a hedge against inflation both locally and internationally. T...

Top