What is an investment?
Fundamentally, it is something you spend money on in the hope that it grows in value. No investment is risk-free, so there’s never a guarantee that you will make money. When you put it like that, it sounds an awful lot like gambling.
When you gamble your money, you’re basically putting it up with the hope that you’ll generate some returns. So, is this the same as investing? Well, not quite. You see, investing is a smart thing to do with your money while gambling is something that should always be avoided.
Still, it’s easy to look at some investments and wonder where the line is. At what point is something a gamble or an investment? We’re going to look at a few key talking points and arguments in today’s post, to help you understand the difference between the two. Hopefully, this also helps you make smarter choices with your money.
Gambling is based on luck
The whole premise of gambling is based on the idea of luck. You have odds for certain things happening, and then you have to guess if they’ll happen or not. There are simply too many variables at play, all of which are out of your control.
For instance, let’s say you’re trying to make money betting on basketball matches. You’ve seen some people win big, so you give it a go. If you bet on the winner of a match, your money is basically in the hands of the players playing. So many different things can happen that influence the outcome - it’s all out of your hands. There is very little skill involved, and the biggest issue is that you can’t do anything to influence the outcome - at least, not legally!
A lot of investments can be influenced by you
While gambling your money is luck-based, investing is slightly more in your control. Of course, it depends on the type of investment you’re looking at. If you are investing in stocks and shares, then things are out of your control in the sense that you can’t influence the stock market prices. Still, you can make knowledgeable investments based on previous data and common trends.
Anyway, that’s beside the point. Other investments can be directly influenced by you. This means that you have some level of control over how much money you make. A couple of great examples are real estate and cars. When you buy a house, you can make alterations to it that increases its market value. This is why property flipping is a thing; you invest in a home, make improvements, and flip it for a big profit. The same can be true of cars - you buy an old car, make upgrades, and sell it for more money. It’s called wheeler-dealing, and there are shows dedicated to this sort of thing.
Speaking of shows, you may have seen things like Storage Wars or Storage Hunters. They also give us an example of an investment that’s in your hands. You can bid on storage lockers, and then sell the contents for a profit. How is this in your hands? Well, you can often see what’s inside the lockers beforehand. If you’re clever, you can spot things that are worth a lot of money, guaranteeing that you’ll make a profit.
By contrast, there is nothing you can bet on that will allow you to have some level of control over the outcome. Unless you’re betting on yourself, which is unlikely to ever be something that happens!
Investments carry lower risks
Make no mistake about it, investments do come with risks. There is a chance that the stock market can crash and your investments go through the floor. But, the risks are far lower than they are when you’re gambling. People can look at the stock market and think that it’s just gambling for rich people. However, there are some key differences.
To start, you can always sell your investments to cut your losses. If it looks like something is going to happen and the value of your investment is falling, you can sell it before you lose too much money. When you gamble, you can’t really do this. You log into an online casino and place your bets on a game of roulette and all the money you’re “invested” will be gone.
Moreover, investments tend to go through up and down spells. Right now, pretty much all stocks and investments are on the decline. This is simply to do with the current state of the economy, blah, blah, blah. We won’t get too involved in that as it’s like opening a can of worms. Anyway, things are bad now - as they were during the 2008 financial crisis. But, things can and probably will get better. Sometimes, investments decrease in value, but then they rise back up and are better than ever before. You don’t see the same thing with gambling; once you’ve lost a bet, the money is gone forever.
Investing is a long-term strategy for financial stability
Ultimately, the biggest difference between investing and gambling is that investments are for the future. Investing your cash in clever things is a proven way of growing your wealth and achieving financial stability. When done correctly, you will face minimal risks and be in control the entire time.
On the flip side, gambling is not a viable method for making money. It’s usually a desperate attempt to get some cash in the short term. Even if you win a few bets, it is not sustainable. Over the course of a year or a lifetime, even the best gamblers will end up losing money overall.
The whole point of this post is to educate you on investing and to explain how it is not like gambling at all. Many people are worried about investing money as they feel like it’s a big risk. In all honesty, investments are only risky when you treat them like gambling and put loads of money into things without any research, hoping to score big. If you learn how to invest correctly, it will help you grow your wealth over time.
