Have you ever caught yourself thinking, “How does the stock market compare with real money gambling?” You’re not the only one to ponder such a question, and it’s one of the hottest debates in the world of modern-day investing right now.
According to scientists, both gambling and investing produce the same neural response in our brains. But if this were true, why do we treat them so different from one another?
Society glorifies investing as a legit and fast-growing way to make money buying and selling, shifting capital, and staying ahead of inflation — yet what we rarely shine a light on is the risk. You could lose your entire investment in seconds if stock prices plummet. And if a company goes bankrupt, stockholders are usually the last to be paid after creditors and bondholders.
Then we have gambling. Anyone who’s anyone knows that wagering money at a casino is only ever going to go one of two ways: you win your bet or lose it, regardless of whether you’ve put down $1 or your entire life savings. So, in context, how is this any different from trading stocks and shares? After all, there’s just as much to lose, if not more.
To see if we can better fathom the polarities between gambling and investing, we’ll compare them from a more analytical perspective.
Understanding Investing and Gambling
Before we can understand how gambling and investing correlate with each other, we first need to analyze them individually. Gambling can be considered a form of investing because the process is essentially the same, but the life span is short-lived. When you place a bet, you’ll know whether you’ve made a profit or lost your money within minutes.
Serious investing, on the other hand, is about being in it for the long term. If someone is putting their valuables at stake under specific terms and conditions and expecting a profit or loss over durations of time, this is classed as investing because results take comparatively longer to see than the outcomes in gambling.
These are the most basic classifications for investing and gambling, but we have to acknowledge that other factors also come into play here — namely, the types of demographics they attract and society’s general approach towards each one.
Analysis of Gambling and Investing Across Multiple Parameters
Throughout the next section, we’ll analyze the multiple different parameters for both investing and gambling. Bear in mind that we have taken into account various factors that can be seen and recalled by anyone who does a quick search online. In addition, these aspects of analysis may differ from other individuals according to their own personal views and opinions.
So, let’s delve straight into the debate and assess the key elements of gambling and investing based on the following parameters:
- Associated Risks
- Individual Mentality
- What Society Thinks
- Timeline of Results
- Long-Term Repercussions
- Individual Attributes
When we analyze investing and gambling in terms of risk, it’s pretty fair to conclude that there is a proportional element for both. To be precise, the platform that a person chooses for the task determines the risk level and the odds they’ll be up against. Therefore, when you compare both of them according to the uncertainty of the outcomes, it doesn’t matter whether you’re playing a game of high stakes video poker or backing a company on the international stock exchange — the risk is still prevalent, just in a different way.
When there’s a ton of money at stake, our human minds can churn up all sorts of thoughts and emotions. Whether we’ve just hit the jackpot or sold all our shares at just the right time — exhilaration and triumph can be felt throughout every bone in the body. However, there are still some major differences in how we interpret other types of feelings that gambling and investing can conjure and how we act on them.
A stock trader normally has a more relaxed state of mind than a gambler because they know that their investments are likely to pay off over time. In comparison, gamblers know that they won’t have to wait long to find out their results and are therefore more prone to increased levels of anxiety.
When we’re unsure about the risks we’re taking, our mental states pay the price. This is what consequently leads to things like gambling addiction, neglecting our responsibilities, and chasing after losses. Apart from these qualities, though, practically everything is similar about the mindset of gamblers and investors.
We as individuals can personally choose to overlook anything, but it’s not so easy when it comes to society’s outlook. Our culture takes a mostly positive stance towards investing. It’s considered an ethical and highly rewarding profession that can see people expand their assets exponentially.
However, the public’s perspective radically changes when we start talking about gambling. Many view gambling as some dirty-dealing taboo that fosters crime and ruins lives, despite the fact the end goal and initial process of investing money are exactly the same. While there are differences of opinion for both of these activities, as a whole, one is mostly seen in a good light and the other in a negative.
Time of Results
As mentioned, when we compare the time it takes to see results for both activities, investing is much more of a slow burn. You’re relying on consumer trends, companies, policies, and progressive data to make you a winner, which could take months or potentially years.
With gambling, the results come out far more quickly. Whether you’re playing a slot machine, wagering on sports, or scratching off a lottery ticket, you can find out if you’ve made a profit or incurred a loss in a fraction of the time.
There is a distinct contrast between the long-term effects of gambling and the impact investing can have over long periods of time. You’re more likely to see higher returns when you trade assets with short-term volatility, such as stocks. Being a long-term investor can also bring tax advantages to a person’s capital gains and save on other expenses like transaction fees.
Although there are plenty of people who have made a successful career from gambling, the nature of the activity definitely comes with its risks. Problem gambling can result in everything from depression, anxiety, other mental health problems, bankruptcy, conflict in relationships, and a myriad of other problems that can have detrimental effects on a person’s quality of life.
What are the required qualities when it comes to being a successful gambler or investor? If you look at the typical profile of a gambler, the most noticeable quality they have is their risk-taking ability. If you are prepared to take risks, there’s a good chance you’ll do well in gambling. For an investor, a strong knowledge of stats and figures is the most essential.
Ultimately, the risks associated with gambling and investing are practically the same. With investing, you’re able to better calculate and prepare for losses, whereas, in gambling, losses are imminent. Whether you’re looking to explore either, the best advice we can give is to make sure you understand the risks and know what odds you’re up against at any given time. That way, if you don’t get the results you’re hoping for, you won’t be too disappointed.