Very Few money making avenues have such a thin and clouded line as the difference between gambling and investing. And with Cryptocurrencies, that line just got even more clouded and thinner.
According to Investopedia Gambling is defined as a game of chance where you choose to trust your gut that buys placing money in a particular game you will receive a sizable monitory winning at the end of the game. People love it because it gives you an adrenaline rush while placing considerable returns in your pocket.
Investing could be defined as gambling, and no one would tell the difference because the definition above perfectly describes it. But economists believe that investing is placing your money in a growing asset in the aim of gaining a profit as a return. Did you notice that in gambling the returns are winning and in investing the returns is profits?
Similarities between gambling and investing
- In both cases, there is a sizable level of risk and reward
- You are advised to use only your excess money to make a bet or investment
- You are encouraged to know when to cash out
- There is a high level of uncertainty
- There is both a game of chance
- They can both make you very wealthy
Differences between investing and gambling
- In gambling, there is a house involved. But in investing there is no house, although the market itself has been defined as the house
- In investing through numbers you can predict the outcome of the investment, but in gambling, it is only a game of chance
- An investment is categorized as an asset while a gambling win is not
- An investment portfolio can go a process of analysis while a gamble cannot
This shows even more clearly that gambling and investing can be tricky to differentiate but that both are at the same time at completely different ends of the spectrum.
As an individual how not to gamble in the stock market
The reason gambling and investing is so closely defined is because many people treat the stock market as a gamble. But this shouldn’t be the case at all!
Invest in what you think will grow
It’s all about growth with investing. Look at an asset that you believe has a good chance of growth
For new investors, time is a good thing to factor in while investing. Though investing in an asset or a company that has been in the market sometime will likely get you lower returns there is less risk.
Look for powerful incentives
Some companies have great incentives when you invest in them such as a hefty dividend. When making an investment look at the incentives that the company offers.
Investing and gambling both give you a great way to make money. But suffice both being highly uncertain, at least investing is somewhat predictable.