Submitted 11 months ago by ccunning@lemmy.world to [deleted]
Is there a hard threshold? Do high risk investments such as penny stocks qualify as gambling? Do low risk investments? Annuities? Bonds? CDs?
This comment got me wondering.
Is it more to do with the venue? Stock markets and real estate vs casinos and the lottery?
Were the MIT Blackjack Team gambling or investing?
Is this just another semantic hotdogs are sandwiches discussion or is there an agreed threshold?
If its fun or get rich quick. Gambling.
If it’s some boring thing some adviser told you that you are sick of, that you then told your family and they are sick of it. You just going to leave it and forget about it. Then it’s investing.
I'd say that it is always gambling because there is risk involved.
But I would say that both traditional gambling and investments have the same threshold for problematic behaviour, and that is when you spend more money than you can afford to lose. That is regardless whether you win or not.
I do t consider bonds or CDs as gambling. They are guaranteed unless the entire financial institution dies, in which case your investment in ammo matters more than money.
With this approach every purchase is a gamble
I'd go further than that and say that deciding to leave the house or not, are both gambles.
But in the context of spending money with the only net result being you lose money, make money or retain the same money with no other goods or services provided in return. Then gambling is the primary attribute of that spend.
Bookmakers and investments meet that criteria, your other purchases are not.
Feels like it when my blueberries spoil on the way home as if the store used magic to keep them alive.
IMO: When you do it for the entertainment/feeling/rush, it’s gambling. When you do it for the returns, it is investing. I also think the other poster that mentioned investing as being interested in the success of the endeavor, that would exclude shorting and I think might be a useful distinction.
Casino games and sports betting all have lower expected value (probabilistic value) than their cost, so they are not something you can do for returns (you have better expected returns by not participating).
There are plenty of people that are misinformed, dishonest, or stuck finding a bigger fool that will sell you a gamble by calling it an investment, and expected value is not guaranteed value.
If you’re talking about stock picking, hard disagree. Emotion has nothing to do with it whether or not it’s gambling.
If picking stocks was anything but a gamble portfolio managers wouldn’t have such a god awful track record.
Just because you are wrong about your expected value calculations (or were right but the actual return was on the lower end of the range) and have made a bad investment doesn’t change the fact that it was an investment because you were doing it for the returns.
In short, performance doesn’t matter for this distinction, at least IMO.
None of the answers I’ve read so far actually answer your question with basic facts.
When you invest then you are buying a tangible financial instrument: a share of a company or a treasury bill or a municipal bond and so on. There is the expectation that over time, the value of your financial instrument will increase in value but this is not guaranteed. The lack of guarantee is the risk. Some instruments are riskier than others. The level of risk does not define gambling.
When you walk into a casino and bet money on roulette, what are you buying? You are buying nothing more than a fleeting chance at winning more money. It is entertainment by thrill. There is no tangible thing that you own from gambling.
Investing is one way that companies can raise capital to expand their business. Business expansion can lead to greater employment and higher standard of living. For investing to work as an economic system there must be liquidity. Someone must be willing to buy your financial instrument later at a higher price or some town must still be collecting taxes to pay back your bond years later.
Hopefully you can see now why investing is encouraged and supported in society and gambling is either illegal or merely tolerated.
Shorting, crypto trading, options are all gambling. Long term investments are usually not.
One is hoping that the price will go a certain way in the short term. The other is giving a company money so they hopefully turn it into more money. that is the difference, nothing to do with casinos.
I’d argue investing is gambling with varying degrees of risk depending on what what you are putting your money into. Even if that risk is very low there is always a chance something crazy happens and you lose everything.
Ultimately it gets to the point of, is the risk higher than the risk of money in a bank account.
Given that (at least in the us) money sitting in a checking account is 100% risk with guaranteed negative returns (over time inflation will outpace interest), there are investments that can generally be considered safer (bonds, tbills, etc) than just holding dollar bills.
Well, investing is technically always a gamble including buying assets like a house or gold. A better question would be “When does gambling become investing” and in my opinion that’s when the expected return is positive.
Expected return for most crypto is negative, some are positive but they’re always a gamble.
MIT team took an approach that has guaranteed success if played enough times by using math. It’s not gambling, just playing a game.
Stock markets are always a gamble and investment, but buying index fund stock is less of a gamble than selecting individual stock because it’s less risk.
Another question to ask is “when does a gamble stop being a gamble?” and that’s broadly when the potential downside is very unlikely. Think buying treasury bonds, housing after housing crash, stocks after stock crash etc.
People also have very different views on “What is very unlikely to go down” so depending on who you ask stock, crypto and real estate can all be both gamble and not depending on which person is looking at it.
Always has been, just has better PR
Agreed, every investment has at least some kind of risk.
When you can’t afford to lose what you “invested”
Neat question. Hotdogs are sandwiches imo.
That said, some types of investment provide additional advantages over simply appreciating in value. A stock can pay dividends, a house can be lived in, stuff like that. Could probably draw a distinction there. Additionally, some investments are guaranteed, like a savings bond. Could probably draw another there.
If I had to draw some clean line somewhere, I’d probably try define gambling as situations where you’re not intended to be able to “win money” on average, where investments are. The line is drawn via intention though, not anything quantitative. So, pretty inherently fuzzy.
Cube theory clearly established that hot dogs are tacos. It’s all based on the location of structural starches.
It’s always a gamble. What matters if it’s high risk or low risk. If you put it straight in a bank, I guess you’re gambling the entire economy isn’t going to be in shambles. If you’re gambling in companies, you’re gambling they’re gonna be successful.
And if the market collapses your money is useless anyway
Well there are still physical things. There’s gold, silver, precious metals, property, food, water, etc.
When
The expected return becomes negative, or
The risk/return ratio moves away from the efficient frontier with no other motivating factor.
When it’s not government bonds.
It’s subjective… what does “gambling” mean?
Any thing you do has an element of risk, so you could say it’s a gamble.
A lot of insurance investment came from gambling, so the line is kind of fuzzy.
I would like at it as trying to describe your investment strategy in terms of trying to maximize total expected value and giving yourself enough chances to get close to that expected value.
Investors hedge their risk, gamblers bet on it.
When I feel I shouldn’t and I do it anyway.
In my opinion the shortest answer to this would be: When you go from index funds to individual stocks
It’s gambling when you’re not doing it because you want who you invested in to succeed in their endeavor, but specifically for the return.
Any investment can be seen as a “bet”, the difference comes from the conditions out of which the return comes. Does it come out of a business’s operations, or a piece of some other source of income? Then even a high-risk investment is still an investment. Even an investment in an asset which is expected to appreciate in the future is still an investment, as long as that appreciation is based on something tangible.
A gamble will have nothing concrete backing it, it will just be down to chance. Like betting on Red at Roulette. Or going to FanDuel and betting that Pete Alonso will hit a home run in tonight’s game. Those odds are made by professional bookmakers to make the chances as close to 50/50 (minus the sports book’s big) as they can.
Basically, a gamble is up to random chance, an investment can be backed by a business case. But there are aspects of risk to both.
I do call my small basket of individual stocks gambling (it is a couple hundred bucks, loses value overall, just like gambling) and the 401k I call “investing”.
I do think investing in general is speculative though, so yeah I consider it gambling. Not bonds, but stocks yes.
db2@lemmy.world 11 months ago
🌎🧑🚀🔫🧑🚀
tea@lemmy.today 11 months ago
So emojis like this are the internet equivalent of the cockney rhyming slang, innit?
Cosmos7349@lemmy.world 11 months ago
Can confirm. I am from the year 2124, and I do not understand the meaning of this message.