The Bottom Line So, when skeptics tell you investing is merely gambling by another name, refer them to the data. The data clearly shows that gambling is a no-win venture, and not at all comparable. Though investment and gambling both cover some risk with them, investment is lesser risky or risk-free. Here we will discuss the risk associated with an investment in the stock market. In the case of direct equity investment, an investor needs to gather sufficient knowledge about the stock market and the stocks or shares he wants to buy.
Christians often wonder, is it gambling to trade in the stock market? The truth is, if you look at any business activity, there is risk involved. Some people may call stock trading a gamble, but it is a risk rather than a gamble.
If you don't have any skill sets, it is a gamble. If you learn skill sets on how to properly trade in the stock market, like the big boys in Wall Street do, you increase your success, and it is business rather than gambling. It does have risk, like all business does, but it also can have the potential for great return.
In the Bible, in the Parable of the Talents, God teaches that He loves educated risk. Jesus talks about three individuals that a wealthy man gave his money to; they were supposed to be good stewards of it. Two of them took risks, and by taking the risk, they doubled the money. The third one was fearful. He didn't have skill sets, and he buried the money, which made no interest. In the end, the first two were rewarded greatly, and the third one was punished.
Trading is not gambling when you understand how the stock market works. We'll teach you those skill sets at TRADEway.
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Right before the 2010 Super Bowl, a page 1 article in the February 5, 2010 Wall Street Journal opened with this sentence:
Gambling Vs Investing Christian Academy
'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.
Gambling Vs Investing Christian Beliefs
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.
Gambling Vs Investing Christian Colleges
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:
Gambling Vs Investing Christian Apologetics
'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.
Right before the 2010 Super Bowl, a page 1 article in the February 5, 2010 Wall Street Journal opened with this sentence:
Gambling Vs Investing Christian Academy
'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.
Gambling Vs Investing Christian Beliefs
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.
Gambling Vs Investing Christian Colleges
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:
Gambling Vs Investing Christian Apologetics
'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?
