There are a few differences between investing and gambling, but people who don’t know the differences argue that they are the same. We will take time to compare them so that an investor can know when he is gambling and when he is investing.
Let us start by looking at their dictionary meanings. In literary terms investing is an act of laying out money or capital in an enterprise with the expectation of profit. It is important to stress at this point that investing requires an investor to take calculated risk.
Someone might ask that if investing requires an investor to take calculated risk, then what’s the reason behind the failure of some investments? This is a question that people will never stop asking because the fact remains that some investments will still keep failing.
So what is the answer to this? The reason some investments fail is due to the fact that some investors refuse to do due diligence in any area they choose to invest. Due diligence is fact-finding that helps an investor take calculated risk.
For instance, an oil and gas expert who has spent all his years in that sector now chooses to diversify into investing in agriculture. If he takes a decision based on his basic knowledge in agriculture he might go wrong. And such investment might fail.
He is supposed to consult with an agriculturist who will advise him on what to do and how to do it. In fact, it is advised to employ the services of a consultant in any area of agriculture he chooses to invest in. The same goes for someone who wants to invest in stocks; he is advised to employ the services of a stockbroker.
Investments fail sometimes because investors do not carry out due diligence in areas they choose to invest. Although, there are other reasons which may be beyond their control, such as uncontrolled circumstances like change in weather, and so on. But, it is important that I stress on the factors that can be controlled on the part of the investor.
So what then is gambling? Gambling literally means the act of playing for stakes in the hope of winning. It could also mean the act of taking a risk in the hope of a favourable outcome. It is important that we take note of the word “hope”. The word “hope” simple shows that such risk is not calculated but a reckless rick. It sometimes may work in the favour of those that chose to gamble, but it can also go in the other way.
How do you know you are gambling and not investing?
1. Gamblers are always open for any outcome I mean, both positive and negative, so they are usually not surprised when they lose out.
2. Investors are positive minded, because they know they have taken their time to study and understand the trend; they are sure of their outcome.
3. Investors take calculated risk, while gamblers take reckless risk.
4. Gamblers are only playing a game of chance, while investors are following trends that are proven.
5. Gambling is addictive while investing is decision based on opportunity.
6. An investor studies a prospectus that contains facts which help him make informed decisions, while a gambler is only excited by an ample outcome that could sometimes be deceptive.
7. An investor can track the growth of his investment while a gambler has no track for his gambling.
These are indicators to know if you are gambling or if you are investing.