Comments on: Is Investing Gambling?

By: Economist Joe

Economist Joe — Sat, 10 Apr 2010 18:17:20 +0000

J IS a gambler/investor.

All investing is gambling. No fine line.

Anyone who hands over their money to another person with the promise of a return without a guarantee is a gambler.

When J puts her money in the savings account, she is hoping that: a) The dollar remains relatively stable and strong; b) that the institution where she opened the account will remain solvent; and c) that the FDIC will pay her if the institution fails.

With all three conditions, there are NO ABSOLUTE GUARANTEES.

By: Jamel Rose

Jamel Rose — Thu, 11 Feb 2010 02:17:09 +0000

I agree with Brad. “If you dont take the time to look at a company’s financials before investing in them then you would be gambling with your money.” You must give lots of attention to it.

By: Brad

Brad — Wed, 10 Feb 2010 16:17:26 +0000

If you dont take the time to look at a company’s financials before investing in them then you would be gambling with your money. I would also argue this if you just chose a mutual fund and stuck your money into it without checking its track record. If you do your homework (aka view balance sheets) of prospective company’s then you can invest invest long term with relative certainty that you will make money.

One other point to make is that for someone to win at gambling, someone else HAS to lose. You are profiting off of someone else’s misfortune. Some may make the argument this would apply to the stock market but it is more supply and demand. If no one will sell you a stock you seek at a certain price then naturally the price of that stock has to go up to meet the supply price.

By: Lisa of Creditnet.com

Lisa of Creditnet.com — Wed, 10 Feb 2010 00:57:41 +0000

Simon, my investment / gambling attitude is somewhat similar to yours. I see gambling as a form of entertainment – something I will do IF I can afford to do so. Just like I don’t expect to receive a monetary return when I go to the movies, I fully accept the (rather high, for me) possibly of leaving the blackjack table with absolutely nothing.

In regards to investments, however, if I don’t expect to receive a return, it’s not likely I’ll invest in it. To me, gambling is throw away money, and if I make a buck or two, good for me. But only the small majority of my investments are considered “high risk”.

Where my attitude towards the two are similar is that prior to investing or spending on entertainment, I will always make sure my monthly expenses are covered and that my “emergency fund” (liquid savings of 4-6 months’ worth of expenses) is in tact.

By: Taylor

Taylor — Wed, 10 Feb 2010 00:33:22 +0000

I view poker as an investment alternative that most do not have. I started with $100 about a year and a half ago, and now have profited over $2000. Not everyone has the ability to do this, so don’t think I’m endorsing this as a way to make money. (Not to mention, the hourly rate is laughable thus far.)

Poker requires strong analytical skills, reasoning abilities, and mathematical aptitude, and these abilities are invaluable for active investors as well. Combine the above skills with a desire to let one’s money bring strong returns, and you have the connection between playing poker as a true investment and investing in the markets.

Taking an active role in your finances (I’m not too big of a fan of automation, other than splitting direct deposit to multiple accounts), from debt reduction to daily budgeting to long-term investing, logically should yield better results than setting your financial ship on autopilot. However, a person who is active with debt reduction and budgeting will do better with auto-pilot investments than high yield savings.

Ultimately, though, I think it’s important to follow the ubiquitous advice above: “Your portfolio should reflect your risk tolerance.”

P.S. I include a poker account in Quicken so that I can track my investment performance alongside the rest of my portfolio.

By: Simon Zhen

Simon Zhen — Tue, 09 Feb 2010 15:32:19 +0000

@JoeTaxpayer: I was speaking of their gambler and investor “mentalities”. J is actually neither of the two.

By: JoeTaxpayer

JoeTaxpayer — Tue, 09 Feb 2010 02:29:07 +0000

There is sometimes a fine line between the two. There are those who would consider the use of options gambling. On the other hand, there are strategies which will guarantee that over a certain period you won’t lose any principal (e.g. buy a 10 yr zero coupon bond to replace your cash today, and invest the difference in a mix of out of money options.)

BTW – how is J an investor when only keeping cash in a savings account? She staying ahead of inflation?

By: 20smoney

20smoney — Mon, 08 Feb 2010 18:42:56 +0000

Value investing where you buy and hold cash flowing (dividend) stocks is much different than day trading or speculating on penny stocks…. there are so many diff forms of “investing” or trading that its tough to say.