Gambling Vs Stocks

Posted by Wall Street Oct 21, 2018. Tech Company Stocks for Less Than $5 per share As the tech industry continues to grow at a super-fast. Perhaps the biggest difference between these two categories of gambling stocks is the fact that many sports betting companies have exposure to online gambling, while regional casinos require gamblers to be at their brick-and-mortar establishment in person. Investing vs gambling: Investors and gamblers both want to put more money in their pockets. But by building a diversified portfolio with stocks, bonds,. Gambling is time-bound. The concept of time is another key difference between stock investing and gambling. Gambling is a time-bound practice, but stock investing can last several years. In gambling, once the game or hand is over, your chances to make more profit from your wager are closed.

Several times in my short career as an economics professor, I have had someone tell me that investing in the stock market is morally questionable because 'it's like gambling.' Certainly the unusual volatility we have seen in the stock market over the last several years has, like a lottery, enriched some and impoverished others. But is buying a share of stock like buying a lottery ticket?

Gambling and stock market investing both involve risk-taking, but this does not equate the two. Taking risk is inherent to diligent and productive work (Proverbs 22:13; Ecclesiastes 11:4). Gambling is consumption — it is done for the entertainment value of taking a risk. Stock market investing contributes to production — it is the taking on of risk as part of providing a valuable service. Because gambling is consumption, a gambler can expect to lose money, on average. An investor in the stock market can expect a considerable return, on average.

The Problem with Gambling

Gambling, reduced to its essence, is the exchange of a dollar for an expected return of somewhat less than a dollar, sometimes accompanied by blinking lights and spinning wheels. Now, we cannot say that gambling is wrong because it is entertaining, nor can we say that it is wrong because it is risky. We cannot even say that it is wrong because the gambler is likely to wind up poorer, for there are plenty of legitimate activities that cost money. A gambler is engaged in morally questionable activity because he is deriving entertainment from that which ought to have no entertainment value, like one who laughs at a car accident. A gambler takes that which is certain — a bird in the hand — and exchanges it for that which is uncertain — a less than 50-50 chance at the two in the bush. Gambling is entertainment for people who enjoy risk and uncertainty for their own sakes. The Bible encourages avoidance of risk (Ecclesiastes 11:1, 2), not reveling in it.

Why Stock Prices Change

People who believe the stock market is like gambling apparently misunderstand the source of fluctuations in stock prices. What seems like random movements or the product of mass psychology actually has a rational economic explanation.

Gambling Vs Stocks

This may be difficult to believe, given the rapid changes in the value of, say, Internet stocks in the last five or six years. First they increased at a rapid pace, even for a few firms that could not show a profit. The closely watched P/E ratios — the ratio of stock price to actual earnings — began to rise to stratospheric levels. Then, as though stockholders had suddenly and simultaneously lost their trust in these firms, the prices began to fall. Had the stock price lost all connection to a rational assessment of the firm's value? Most people seemed to think so. Yet it is not necessary to appeal to irrationality or mass psychology to explain these changes. A firm's stock price is a reflection of the firm's expected ability to produce earnings. Expectations change with new information, and with new interpretations of old information. Therefore, while the actual earnings of a firm may change only gradually, new information can appear instantaneously that causes people to re-evaluate the firm's prospects.

Stocks are generally traded for two reasons. The first is that each individual's investment goals will change over time, and each person will want to change his portfolio to reflect his tolerance for risk, need for income, or liquidity. The second reason is that the person selling the stock has a lower view of the firm's prospects than the buyer. The seller's opinion could be based on unique information he has which the buyer does not, or it could be that the two parties to the transaction simply have formed different theories about the same information. Some have said that selling stock during a boom is a matter of finding a 'greater fool' to take the stock off one's hands in exchange for dollars, but this is a matter of perspective.

Market Speculators

Speculation in the stock market — buying now in anticipation of selling at higher prices later — is valuable and completely moral. Firms that discover ways of being more productive will be recognized by stock-market speculators, and their stock prices will rise to reflect the higher market value of the firm. The firm will benefit directly because its debt will fall as a percentage of its recognized market value, making it easier for the firm to borrow more if it chooses. Later, the firm may find it easier to raise capital by selling new shares of stock, perhaps for higher prices. Because of the information provided by speculation in the stock market, firms with good ideas are recognized early and rewarded with easier access to capital. Firms with poor management or other problems are denied capital. In return for performing the valuable service of identifying more productive firms, the speculator receives compensation in the form of capital gains. Though stock traders are often denigrated as not really 'working' for their living, they are some of the most important individuals in society. Speculation, and the information it provides, are indispensable to wise stewardship of resources.

Does everyone who invests in the stock market have this ability to judge, this skill in evaluating the future prospects of firms? No, of course not. However, over time, those with poorer judgment tend to lose money and be discouraged from future investment. Those with exceptional abilities may 'rent' their skills to others for a fee — leading to a class of professional investors who handle funds for the less capable. Yet all investors have one common trait — a willingness to put off consumption and devote resources instead to that which makes the economy grow in the long run.

As we have seen, investment in stocks provides us with valuable information — a constantly changing market assessment of the values of corporations. This should not be confused with gambling simply because of the risk involved. Instead, we should appreciate participants in this market as future-oriented contributors to long-term economic growth.

Sports Betting Vs Stock Market Reddit


Topics: Biblical Law, Business, Culture , Dominion, Economics

Think investing is the same as gambling or scratching off a lottery ticket?

Many people are nervous about putting their money in the market and hesitate because they believe that investing has more to do with luck than anything else.

In other words, they believe their ability to earn a return on their investment comes down to pure chance—like the flip of a card or roll of the dice. Investors and gamblers do have one thing in common: They both want to put more money in their pockets.

Investing vs. gambling

Investing and gambling could not be more different.

InvestingGambling
You control your risk. You can invest according to your goals and timelines: Conservative, moderate or aggressive.Risky. The odds are always in favor of the house.
Strategy: Slow and steady. Investors plan to make a consistent return on their investments every year.Strategy: Fast money. Gamblers bet it all for the chance to make a bundle fast.
Taxes: By putting your money in a retirement account, you can defer paying taxes on your investment earnings.Taxes: You have to pay taxes on any gambling or lottery winnings over $600
Gambling Vs Stocks

Here’s why investing your money is typically a better option for those looking to increase their wealth, rather than buying a lottery ticket, or going all-in with a pair of jacks:

The odds are in your favor

Anyone familiar with gambling has likely heard the phrase “the house always wins.” Since casinos are in the business of making money for themselves, that means the scales are tipped in favor of the dealers.

Investing is generally a much more effective way of making your money work for you. And most importantly, investors have a lot more control in where your money goes and how it can grow.

Gamblers hope for a quick win. Investors want to build wealth over time

For example, if you bet $1,000 that the roulette wheel hits your lucky number, you’ve got one shot at cashing in. Your odds? 35 to one. That’s a risky bet. And there’s a good chance you’ll walk away from the casino with less money than when you walked in.

Understanding risk

Gambling Vs Stock Market

Investing involves risk. But by building a diversified portfolio with stocks, bonds, and holdings from multiple sectors (tech, energy, etc.), you can balance out your risk. In other words, you’re not betting it all on one investment—or putting all of your eggs in one basket.

Gambling Vs Stocks Vs

If one investment goes down in value, you’ll have other investments that may hold steady, and keep your portfolio afloat.

For example, numerous advisers say an effective way to manage your money is by applying aspects of Modern Portfolio Theory (MPT). Nobel Prize-winning economist Dr. Harry Markowitz conceived the idea for MPT which formed the foundation for portfolio management by balancing risk and return.

The general idea of MPT is that by investing in a diverse assortment of stocks, bonds, and other securities in a multitude of countries, you can minimize risk.

Invest with a plan

You’ve probably seen news reports about people who win a lot of money at the casino or by playing the lottery. These make it seem like a lottery win is not only possible but probable. Unfortunately, it’s not. Losing is nearly inevitable when you gamble.

Gamblers hope for a quick win. Investors want to build wealth over time. Fast money sounds great but it isn’t an actual plan to get you to your goals.

Rather than just “win big,” many investors have a specific plan as to what they’re investing for in the long term. This goal, whether it’s saving for a down payment or a child’s college education, should align with your investment strategy.

Once you have a plan in place, you can adjust your portfolio according to your timeline.

The power of compounding

By choosing to invest your money with a solid strategy you can allow your assets opportunity to compound over time.

Here’s how compounding works:

Say you start putting away $50 a week in an investment account that owns a variety of stocks, bonds, and cash. If that account earns an average of 5% annually, you’ll have over $159,669 in 30 years when the interest is compounded annually.

Investing, simplified

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