Difference Between Investment And Gambling Ppt
- A recent trip to Vegas made me aware of some key differences between investing and gambling. Although both are ways to grow your money, they should not be placed in the same category.
- The odds are in your favor Anyone familiar with gambling has likely heard the phrase “the house always wins.” Since casinos are in the business of making money for themselves, that means the scales are tipped in favor of the dealers. Investing is generally a much more effective way of making your money work for you.
- Jun 25, 2019 Another key difference between the two activities has to do with the concept of time. Gambling is a time-bound event, while an investment in a company can last several years. With gambling, once.
- Difference Between Investment And Gambling Ppt Stocks
- Difference Between Investment And Gambling Ppt Economics
- Difference Between Investment And Gambling Ppt Business
- Difference Between Investment And Gambling Ppt Research
Jul 12, 2016 When I tell people that I’m an investment professional, and that I recommend and own stocks. Many people say, “isn’t that gambling”. Most of the public does not know the difference between investing, speculating, and gambling. The aim of this article is to define and differentiate: “investing”, “speculating”, and “gambling”.
Investing in the stock market and gambling at a casino are often compared and deemed to be very similar ventures. Both the difference between investment and gambling involve risk and choice in hopes of future profit. Investors and gamblers have to decide how much they are wanting to risk.
Some traders typically risk between 2% and 5% of their capital base. Long-term investors often spread their money across different investments in order to try and minimize potential losses as a form of risk-management.
Risk-management in gambling is also proficiently sought after by professional gamblers. They look at whether odds are in their favor before they make a bet. A key comparable principle in both gambling and financial investing is to minimize risk while maximizing profits.
Difference Between Investment and Gambling
However, there is a huge difference between investing and gambling when it comes to stopping losses. In gambling, particularly in sports gambling, there are no loss-mitigation strategies due to the activity being so speculative.
Stock investors however can set up stop losses on a stock investment which is the simplest way to avoid unnecessary risk. If stock drops 10% below its purchase price there is an opportunity to sell that stock to someone else and still retain 90% of the risk capital.
Difference Between Investment And Gambling Ppt Stocks
However, if you put a bet on that states that Tottenham Hotspur Football Club will come first in the Premier League, you cannot get any money back if they come second. You will lose everything you’ve put on, which isn’t the case when it comes to stock investment. Gambling is mainly to do with pure chance, and there are a lot more loss-mitigation strategies when it comes to financial investments.
Time is another difference when it comes to comparing financial investments and gambling. Gambling is a time-bound event whereas financial investing can last several years if not longer. Some companies that pay dividends even reward investors that have purchased shares in the companies for risking their money.
As long as you hold onto their stock, companies can pay you money. But when you’re gambling, you either win or lose your capital – there is no in-between.
The way both investors and gamblers play the odds and try to look for an edge to help enhance their performance is a huge similarity between them. When it comes to gambling, particularly games such as blackjack and poker, players often study behavior, mannerisms and patterns in order to gain useful information which will help them when it comes to their own betting.
Stock investors study trading patterns by interpreting stock charts in order to accurately predict where the business might be going in the future. However there is a difference in terms of how much information is available to both investors and gamblers. Information is valuable when it comes to both sectors, but stock and company information is always readily available and in the public domain.
Unsurprisingly, there is a limited amount of information when it comes to gambling. Sitting down at a poker or blackjack table in a casino gives you next to no information other than whispers about whether the table is hot or cold – all of which is relative to the other tables in the room. Essentially, gamblers go in almost blind other than from the information they can read and know about the players around them.
Although the idea that investing and gambling are somewhat similar isn’t untrue, there are far more differences that similarities when it comes down to aspects of information and time. Both involve risk and revolve around maximizing profit, but in general, investors have a much better chance at success than gamblers.
Many people do not differentiate between the following terms when they invest their hard-earned money in different asset classes, particularly in stock market and often get confused between;
1. Saving
2. Investment
3. Speculations
4. Gambling
We often use the word savings and investment interchangeably, while both are different and both are necessary to secure our future. Saving is done for purchases and emergencies while investment is being done for creation of wealth. I have heard from most of the people that they are savings for their retired life, we need to understand that if we are saving for our retired life we need to invest that money to create wealth. We need to allocate the money wisely between saving and investment, it depends upon behavior of each individual and allocation can be made accordingly. In general, we shall allocate equivalent of three to six months expenses for savings and any excess over it should be allocated for investment.
There is a razor thin differentiation between investment and speculations, in reality it depends upon our own behavior as an investor to differentiate between investment and speculation. Investment and speculative deals are generally done for real assets.
Investment can be defined as “The employment of funds to acquire certain assets after due diligence for mid to long period of time, with the objective of wealth creation and additional income in future”
Speculative investment can be defined as “The employment of funds to acquire assets for shorter duration of time to take advantage of fluctuations in prices of underlying assets”
However, Gambling can be defined as “The employment of funds for entertainment/fun with the chances of return depends upon probability of certain situation or events”. For example, deploying funds on horse racing can be defined as gambling.
Key differential of investment vs speculation vs Gambling is;
1. Risk Analysis and Risk appetite: Investor will generally rely on the fundamental analysis of financials and other factors which can affect the price of the asset class and their decision to invest in particular asset is based upon certain fundamental values associated with the asset. Investors do have long term risk and return perspective. While speculators generally rely on the flow of the wind without analysing any fundamentals. Speculators do take higher risk for expects higher returns in short period. Gambler risk entire capital on bet and relay mainly on luck. They are the highest risk takers and ready to lose original investment also.
2. Price of the asset: Investor does not look at the price of the asset rather it looks at the asset itself to determine the decision to allocate some money now to get some money back later on. Investor does not get influenced by daily fluctuations of the asset price, because his/her allocation of money decision is based on the intrinsic value of the assets rather then price. Speculators look at the price of the asset to allocate the money and they do get influenced by the daily fluctuations of the price of the assets, aim of the speculator is to get some quick reward. Gambling is based upon odds and bets are placed only on assumptions.
3. Time Horizon: Investors allocate money for a particular asset for longer period while speculators allocate money for shorter period, on the other hand gambler place bet for immediate gain.
4. Leverages: An investor allocates money from its own resources for investment while and speculators may also rely on borrowed money to allocate. This is applicable mainly to assets belongs to equity market. Gambler generally allocate their own money and place bet for entertainment or fun.
Difference Between Investment And Gambling Ppt Economics
An individual’s approach towards investment identifies the individual either investor or speculators. If an individual is investing without fundamental analysis, only on the basis of market sentiments and certain news, for a shorter duration can be defined as speculative investor. An Individual who invests with proper fundamental analysis for longer period of duration can be defined as investor.
In conclusion, Investor will get stable return over a long run and I advise all my readers to invest wisely after proper analysis of the company to secure their hard money for fairly good chances for creation of wealth. If you are a speculator, make sure your entry and exit to the market is at right time and always be ready to higher risk of loss of original investment in worst circumstances. Gambling should be avoided always and in most of the cases gambling is not legal also.