I am sure that when you heard people discussing finances, you would have heard someone say something like investing in the stock market is like gambling in a casino. It is somewhat true because you will be risking your money. It involves risk and choice; the risk of your capital, and also with the hopes of a future profit. Gambling is not long-term, like investing in the stock market. It is a short term activity, while equities investments can last a lifetime and make you millions of dollars. If you invest in the stock market, it typically carries with it a positive and expected return on average if you take a look at a couple of decades down the line. It is very similar to investing in real estate. It all depends on the time and also how the economy is doing. I have seen people invest $1 million in a house and gain back $3 million in just a couple of years. That is a profit of $2 million, and it blows my mind.
Investing happens to be the act of allocating funds and committing a certain amount of capital to an asset. It can be stocks, or it can be in real estate. It can also mean you are investing in a company that you believe in. The expectation of return would generate some profits. There is a lot of risks when it comes to investing. It all depends on what you are investing into. You should also know that a low-risk generally means you would be expecting some low returns. Higher returns would accompany a higher risk.
There is a big difference between these two, even though they have one or two similarities. It is important to know that, when you gamble, you own nothing in the transaction, until you get it back. But, if you invest in something like stocks, you on the stock.
For example, if you paid $100,000 for a particular stock, and it reduces in value, you don’t lose the money yet. You face a loss if you happen to sell it. But if you wait for it to go up in value, you will make a profit.
Gambling is defined as staking something on a contingency. It is very similar to betting and wagering as well. It requires you to risk money on an event that has completely uncertain and unforeseen outcomes. It heavily depends on chance. Gambling is all about entertainment, for the majority of people. Investing is serious; more serious than gambling indeed. There are professional gamblers who are very efficient at risk management. But no matter how good you are at gambling, you cannot control your chances.
Keep the above in mind when you are thinking about investing vs gambling.