Difference Between Investment And Gambling Slideshare



https://www.podtrac.com/pts/redirect.mp3/media.blubrry.com/prosperity/p/partners4prosperity.com//wp-content/uploads/2010/05/The-Difference-Between-Investing-And-Gambling.mp3

Podcast: Play in new window | Download

Difference between investment and consumption. The United Kingdom has a rich history with real money Difference Between Investment And Gambling Ppt gambling. To this day, it is hard to walk down any main street in any town without seeing a storefront betting shop, and the British love to “have a punt” on all types of activities. When it comes to the stock market, there’s a fine line between gambling and investing. Sometimes it’s hard to tell the two apart. Both strategies attempt to make money in the market and the differences can be so subtle as to go unnoticed.

LISTEN (mp3audio) (5:45 min)

Right before the 2010 Super Bowl, a page 1 article in the February 5, 2010 Wall Street Journal opened with this sentence:

“Investors are sometimes accused of treating the stock market like a casino. Now, one Wall Street firm wants to treat casinos like the stock market.”

The article details the decision of a Wall Street bond-trading company to take over the management of sports betting at a new Las Vegas casino. Lee Amaitis, the company executive who runs the betting operation, says the firm got into sports gambling because “we wanted to turn gamblers into traders.” Using sophisticated financial-markets software, bettors can not only bet on the final outcome, but also make wagers on events during the game, such as whether the next pass might be completed, or who kicks next field goal.

On several occasions, the article noted similarities between investing and gambling. The article even featured a bond trader-turned-professional gambler who said “Wall Street is just a form of legalized gambling.”

Is investing just a form of gambling? For many investors, the answer may be “yes.” But it doesn’t have to be. And it probably shouldn’t be.

In July 2000, Tom Murkco, the CEO of Investor-Guide.com, published an essay titled “What is the difference between gambling and investing?” While Murkco noted that many aspects of gambling and investing might appear similar, there were several distinct and easily defined differences.

For either investing or gambling, the beginning of Murkco’s definition is the same: An activity in which money is put at risk for the purpose of making a profit.

But while the purpose of gambling and investing is identical, the methods by which the purposes are achieved are drastically different.
Here are Murkco’s distinctions:

When someone invests…

  • sufficient research has been conducted;
  • the odds are favorable;
  • the behavior is risk-averse;
  • a systematic approach is being taken;
  • emotions such as greed and fear play no role;
  • the activity is ongoing and done as part of a
  • long-term plan;
  • the activity is not motivated solely by entertainment or compulsion;
  • ownership of something tangible is involved;
  • a net positive economic effect results.”

When someone gambles…

  • little or no research has been conducted;
  • the odds are unfavorable;
  • the behavior is risk-seeking;
  • an unsystematic approach is being taken;
  • emotions such as greed and fear play a role;
  • the activity is a discrete event or series of discrete events not done as part of a long-term plan;
  • the activity is significantly motivated by entertainment or compulsion;
  • ownership of something tangible is not involved;
  • no net economic effect results.

When defined this way, it’s easy to see the differences between investing and gambling. It’s also easy to see that because of the methods some people use to invest, their behavior may more closely resemble gambling.

For example, industry studies have repeatedly shown that the behavior of mutual fund investors often accounts for poor investment performance. Because they don’t approach investing systematically, emotions like greed and fear may cause people to make impulsive decisions, with little or no research. Not surprisingly, the results from these methods more often resemble the returns from lottery tickets.

Not Gambling with Your Investments: Easier said than done?
In his book, Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Mistakes With Your Money,author David Adler says it’s the psychological component of investing that is the most difficult to manage. Adler contends that behavioral research shows many individuals have an almost over-whelming set of hard-wired dispositions to take gambles rather than make investments. Adler quotes Andrew Lo, an MIT professor of finance:

“The same neural circuitry that responds to cocaine, food, and sex has been shown to be activated by monetary gain as well.”

For some people, the thrill of investing/gambling can be addictive. But when the stakes are one’s financial future or retirement, or your children’s college education, the need for a thrill shouldn’t come by jeopardizing one’s investments.

This imperative to not compromise investing by gambling highlights one of the greatest benefits of working with a team of financial professionals: Besides receiving informed advice, a financial professional can often serve as a protection against gambling with your investments, by encouraging you to make sound decisions based on good research that have a high likelihood of success.

Take a moment to consider the last few major financial decisions you’ve made in the past year. Then look at the list above. Did you make an investment or take a gamble?

Investment can also be well known from gambling and some of the examples of gambling are card games, lotteries, and horse race. Gambling includes high risk and not only for high returns but also the associated excitement and it is unplanned, unscientific without the knowledge of the nature of the risk involved.

Investment is defined as the employment of funds to acquire certain assets after due diligence for mid to long period. Investments deal is generally done for real assets. Most of the people are nervous about investing money in the market because they believe that investing has more to do with luck.

People also believe their ability to earn a return on their investment comes down to pure chance such as the flip of a card or roll of the dice. Investment is being done for the creation of wealth and also investments are considered as gambling.

Investors and gamblers both are want to put more money in their pockets and also the investing and gambling could not be more different. If an individual is investing without fundamental analysis, based on market sentiments and if an individual who invests with proper fundamental analysis for a longer period of duration can be defined as an investor.

Investment Vs gambling:

Here you are going to see the difference, let’s see about the difference between gambling and investing,

Difference Between Investment And Gambling Slideshare Presentation

Leverages: Investors are allocating money from their resources for the investment and this applies mainly to assets to the equity market. Generally, gamblers are allocated their own money and bet for entertainment.

Price of asset: Gambling id based upon odds and bets are placed only on assumptions and at the same time investor does not look at the price of the asset rather it looks at the asset itself to determine the decision to allocate money now to get money back later on.

Time horizon: Gambler placed a bet for immediate gain and on the other hand investors allocate money for a particular asset for a longer period.

Risk analysis: Investors do have long term risk and return perspective and also they will rely on the fundamental analysis of financials. This can affect the price of the asset class and their decision to invest in a particular asset. It is based upon the certain fundamental values associated with the asset.

But the gambler risk entire capital on bet and relay mainly on luck and they are highest risk-takers and ready to lose original investment also.

Difference

Difference Between Investment And Gambling Slideshare Social

Financial profile or funds availability: Investment is stock trading gambling, and their funds or looking to create wealth and on the other hand gambling has wealth and looking to have fun.

Difference Between Investment And Gambling Slideshare Business

Finally, invest wisely after proper analysis of the company to secure hard money for fairly good chances for the creation of wealth and gambling should be avoided, in most of the cases gambling is not legal. These are the basic thing about investment vs gambling and it will be useful for you before investment.