Investing is not Gambling – Ramesh was in an office and makes a call to Suresh & asked, “Do you wanted to open a Demat account?”
Suresh: A Demat account!
Ramesh: Yes, a Demat account for direct investment in the share market. What do you think?
Suresh: Why you wanted to open a Demat account? We already do investments through Step-Up SIP & also sparing money for our retirement. And you also explain to me well about retirement planning. In both cases, the compounding effect will play its role and giving us wonderful results. Now, why you wanted to do Gambling by putting your money directly into the share market? (Also, Read Power of Compounding?)
Ramesh: I am not doing any kind of gambling. Investing is not Gambling.
Suresh: But I have heard and seen people that investing is just gambling. A lot of my colleagues put money in the morning & get the stuck whole day. Most of them face disappointments, only a few cheers. But the next day, the cheered faces turn into disappointments as well. I have seen most of them lost their hard-earned money into gambling.
Ramesh: I respect your views & thoughts. I think you have seen gamblers to date. Whatever you said about your colleagues, I think they all are gamblers. They are just putting money and crossing their figures & waiting for their money to grow.
If I also do what your office colleagues doing, then I also become a gambler. But investing is not gambling because I will not do what your colleagues does.
We both will open a Demat account & do investing. Let me explain to you why Investing is not gambling.
WHAT IS INVESTING?
Suresh: Yes, we started investing with this purpose.
Ramesh: The fund houses that take care of our SIP’s are heavily putting our money into the stock market to get food returns. That means they are giving liquid capital to those companies that need it intending to generate income or profit. That also boosts the wealth of the country’s economy. Also, lead to an increase in the value of the company & also our investment in it. But before investing, the fund houses do all due diligence, so the value of their money grows continuously.
Suresh: Oh! It seems quite interesting.
WHAT IS GAMBLING?
Ramesh: Now, gambling is also done with a similar intention. But in this case, there is a high chance that the value of money decreases, or you may lose all your money. A gambler puts money with uncertainty. One of my office colleagues comes to me; at the time when the market about to open. He said, put your money in this stock. I asked how you are confident. He said he gets a tip from his friend. When the market opens, the value of his money decreases instantly. Within 5 minute’s he took his money out. He faces disappointments because he put money with uncertainty & loss.
Gambling is done to win the prize money. That is why Investing is not gambling.
ESSENTIAL DIFFERENCE BETWEEN INVESTING & GAMBLING
Suresh: Now, a question comes to my mind that, “if anyone can make money by doing due diligence, then why people are putting their money like gamblers?”
Ramesh: The only one-word answer to your question is “Emotion” that people prefer.
Gambling is a result of Emotions.
Our Greediness is a kind of emotion. We want to become rich quickly. People often invest based on tips or rumors and become a gambler. Investing is an activity that requires much research, while betting depends upon luck only.
Investing Provides Asset Ownership
When we will open a Demat account, we will go for investing, which will become an asset for us. And you know better, “assets are what that put money in your pocket.” Which is well explained by Robert Kiyosaki.
Our office colleagues do gamble that not able them to buying assets. Even there is no luck; there is no money for them. Investing gives ownership of an asset, betting does not.
Investing & betting both involve risk. When we will do investing, we can face market volatility, uncertainty & timings of returns. The greater probability that a loss of principal amount will be only temporary.
But under gambling, we may face market volatility plus risk, entertainment & excitement. The greater probability that, a loss of principal we be permanent.
Long Term & Short Term
You know well that investing is always gives good results in long term. The risk was also reduced. Investing can last a lifetime. A decent return can also be achieved in the long term.
Whereas Gambling is typically a short-term activity. The good return is luck in this case. In the long term, an average return can be achieved. Gambling is particularly done in short term only
The major drawback of gambling is their addiction. The pleasure of excitement keeps you going gambling even you are at loss. If you wanted to live healthy financial life along with mental stability, you must only focus on investing rather than gambling.
Investing with Knowledge can change fortunes
Knowledge is power! If you are investing your money, you can do due diligence by reading companies financial statement, which includes a P/L statement, balance sheets, and cash flow statements. Or even you can get news as well. You can also get information about management over the internet. But in gambling, all these things are unable except news about companies. Good news can make your money, or bad news can take your principal amount as well.
Suresh: Stop! Stop! You have given no. of reasons to open a Demat account.
Ramesh: No, I am trying to correct your mind that, investing is not gambling!
Suresh: Oh! Yes, the way you explained to me about gambling and investing, I liked it. I will open a Demat account but will not put money as my office colleagues do. I will give my papers for the Demat account to open. Thanks, Ramesh, for making my mind and helping me continuously for financial freedom.
The is very little difference between investing and gambling. In both cases, the risk is involved. But one is used as an asset whereas, another is used against uncertain conditions. Investing attracts patience where gambling attracts excitement. A negative expected return or returns for a lifetime is always our choice.
“The only sure thing about luck is that it will change” – Bret Harte