Investing isn’t like speculating in Casinos

Many equate equity investing with gambling. And being in equity markets for more than one and a half decades, I don’t like this idea one bit. But due to this wrong comparison, people don’t give equities the importance it deserves. And we very well know that when it comes to the long-term, there is no better bet than equities to beat inflation. Just have a look at this SIP Crorepati’s story. And if you plan to depend on only your low-return debt savings to tackle the long-term inflation, then you really need to wake up. That is not going to happen.

Investing isn’t gambling.

I repeat – Investing isn’t gambling.

Unless ofcourse you decide to do it the wrong way.

And then, the line between the two gets blurred.

Time and again I have heard things like – “I don’t invest in equities, it’s pure gambling” – Sadly, these are very people who are missing out on the tremendous wealth creation potential of equities. For example, check this and this.

Gambling and investing are two very different things. While the former is a good diversion for getting some cheap thrills and ofcourse making a ton of money (if you’re lucky), investing is about build solid wealth over time. I did try out the former on a cruise holiday in Singapore and Malaysia. I started at (let’s say) X, went up to 3X, got excited, and then came crashing down to Zero! As I said, a good option for the short-term thrill unless you are a casino pro.

By the way, you don’t need to visit an actual casino or a cruise ship to test your luck in casino settings these days. Casino options are easily available online. Just a search will show you how many options are there. Ofcourse, it should be legal in our region. But slot machines, poker, roulette, blackjack, you just have to name it, and it is there online. Ofcourse, some people will always like the overall experience of going to a casino and playing. But for others, online casino games do offer an easy alternative and 24/7 access.

To be fair, common people like us may frown upon people visiting casinos regularly. But when it comes to the pros, it’s like an art or science for them. Just ask them and they will tell you all about it. But let’s leave the pros to do what they think is best for them. For most commoners, casinos are more about trying their luck and enjoying some time off.

Investing on the other hand is about the long term. When done well, it can help you achieve your life’s important financial goals. Investing should always be done with a goal in mind like saving for your child’s education, daughter’s marriage, saving for retirement, saving for your vacations, saving for house purchase, etc.

Ofcourse one can also plan their future goals on getting their bets in casinos and online casinos. But gambling is not investing. Though there are few similarities, there is a thin line that differentiates the two. I am sure you would agree with me, that in gambling, the risks are just too high and it works only if the lady’s luck is really favorable on the day. Else, it’s not a good strategy to depend on hope-to-win as your life plan.

Sadly, there are still millions of people who think that investing money in markets is not different from walking into a casino and putting your life savings down on one big bet.

If you try to understand the business of casinos, you will realize that odds are always marginally skewed in favor of the casino. It’s still possible that the casino (or as it is called the house) may lose money in the short run. But the structural nature of the house and its games is such that over the long term, the odds will allow the casino to turn in a profit.

So as an investor, how can you increase your odds of investment success?

The first is by being reasonable and focusing more on avoiding mistakes than getting over adventurous. And second by investing for the long term. The longer you stay invested, the more likely are the odds to be in your favor. Markets don’t move up in a straight line. But over the long term, and inspite of its ups and downs, the trajectory is upward sloping.

So just like a casino, you may have paper losses in the short term. But if you stick around for long enough, you can improve the probability of achieving a successful investment outcome in the markets.

So if you are really looking to become a successful long-term investor, commit to a long-term strategy that takes into account your financial goals, your unique circumstances, and most importantly, your risk tolerance. If you are not sure, then do not hesitate to get some professional advice from a fee-only investment advisor.

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