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?
🌎🧑🚀🔫🧑🚀
So emojis like this are the internet equivalent of the cockney rhyming slang, innit? I immediately translated that, but someone, in one hundred years with no knowledge of 2020s meme culture will think it’s complete gibberish.
Can confirm. I am from the year 2124, and I do not understand the meaning of this message.
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.
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.
Always has been, just has better PR
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.
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.
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.
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.
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. Walt Disney bought up a lot of useless real estate in the Florida Swamp, but had a plan as to how to make the investment pay off.
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 vig) 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.
In my opinion the shortest answer to this would be: When you go from index funds to individual stocks
When I feel I shouldn’t and I do it anyway.
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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.
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.
