Explain to me how investing is different to gambling

Hi all,

Having never invested at 29, I might be a little late to the party. I’ve perhaps never been in a position to invest – I’d put it down to a combination of early indecision in career paths, a love for living and travelling abroad, expensive rent and £6 pints! But I’d also say that financially speaking, I’m not much of a risk taker.

As a keen sports fan, many of my friends will regularly talk to me about their “accies” – affectionate name for an accumulator bet – on Saturday’s football results. They’ll spend anything from £1 - £20/£30 predicting who will score first, how many corners there’ll be, who will win the game, how many yellow cards the referee will give out. They’ll ask for advice about when to cash out; whether I think Jamie Vardy will score a 92nd minute winner to win the game for my beloved Leicester City and bring home their bet, or whether they’re better to cash out to ensure they at least come home with a tenner. Some of these bets can provide quite handsome returns too, and when they do, it’s pretty certain that I’ll hear about it! On these occasions, it even makes me want to get involved, although what tends to stop me is the cliché that you only hear about it when they win.

I guess what I’m trying to say here is that, in my head, I see investing as a form of gambling, and for that reason, I’ve been hesitant to part ways with my money. So, I’d love to know; how is investing any different to gambling?

I know they’re obviously different things, and I’m aware that investing is considered very important in creating financial wellness. If I speak to my grandparent’s generation for example, many say that they rely on investments to keep their head above the water. Yet even so, the thought of investing is still quite daunting to me.

I wonder if anyone would be willing to share their first experiences of investing? Whether they had similar doubts/fears to me, what they have learned over the years, what their advice would be to someone in my position/age group. I’d also be interested to hear people’s perspective on why they believe investing to be so important in creating financial wellbeing.

Many thanks all!

Tommy

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thanks @tommymack - this is the biggest question I think that novice investors have in their mind, whatever amount of money you have or what age you are.

Let me start by saying that at 29 you are not late to the party at all! In fact it is a great time to start as you’ve got such a long time ahead of you.

So, I would love to read what other’s have to say, but let me get something down here as it just occurred to me.

The BIGGEST issue I think that people have before they start investing, is that they mix up “Investing” with “Trading”. This is probably something to do with popular media, but also with education.

Trading (in shares) is about buying and selling individual shares in individual companies with the main intention of making a profit.

Investing (in businesses, funds, or companies) is about putting your money to work to build long term value for you, that business and the economy.

So, (and I say this as a non football fan):

Trading is akin to the bets you mention. It is thinking that a particular player is “hot” and likely to score. It is about your ‘bet’ that one team is likely to score goals and win a particular game because of conditions at this moment. You think you know the future, and you put your money on the line with someone who, presumably, disagrees so they think they get to keep it.

In the football analogy, I would say that investing is closer to buying into the team. You don’t care about individual goals or matches, but how your money will buy better players, trainers, grounds, nutritionists, and so on. This spending will result in a team that may not win on Saturday, but has a better chance to come in the top half of the table, get TV rights, attract sponsors, etc. Of course, it is still possible that the team loses, and gets relegated. Your capital is still at risk. However, you are not betting on a single event, but a series of them over time.

Your investment is for the long term. You couldn’t realise the value of the team after one weekend.

So, when you look at investments, you are not thinking about what shares will go up in the next days or weeks, but how you would like your money to work for a number of years.

This analogy game has made me wonder whether we could find other ways to explain investing in different terms that make sense to different audiences.

Anyone fancy explaining Trading vs Investing in terms of British Bake-Off? :slight_smile:

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Neither are an obvious vehicle for Noel Fielding.

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Hi Tommy!
I really like your question about how is investing different from gambling!
Well, from what I know, both are based on contingencies i.e. happening or non happening of an event. In the example of a striker scoring in the 90th minute or not, according to me, both of these terms fit in.
But I think in case of investing, you as an individual have the time and chance to weigh the odds/ risk and that analysis is actually based on different criterion, which you won’t have in case of gambling.
But again, this is what I think!!

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An interesting question!

I started ‘investing’ (although it didn’t really feel like that at the time) about 15 years ago (I think). At that time Abbey/Santander was offering a no-loss fixed-term stock market tracker product.

Those are lots of words, but it was basically a neat product where you invested some money for a fixed period, were guaranteed your investment back plus either ~3% cash interest or some proportion of the gains from the market - I think whichever was most favourable to you.

Suffice to say it was the wrong time to invest and I got just the standard interest.

That’s an anecdote (and a nudge to Dozens to offer something similar!) but I think @robert is spot on when he says that investing isn’t trading. For me, investing is picking something fairly unexciting - like Vanguard’s Life Strategy funds - or even a world tracker ETF.

But back to the question. I don’t think that investing is gambling. It has risk - but look at it a bit like working for Project Imagine. I assume (and hope) you have options: that means you get to share in the upside when the company really takes off. But there’s risk: it could all fold tomorrow (although we all hope it doesn’t). I think there’s probably more risk to that than taking out a Vanguard Life Strategy product - or by investing in something like a global stocks and shares tracker ETF.

All personal views, of course. If I were you, I’d ask colleagues and spend time reading up about ETFs and funds like Vanguard.

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For the OP’s question, a quick search “the difference between gambling and investing” on Google (or whatever search engine you use) will bring you the answer.

In short, if done correctly, over the long run (I’m talking about at least 10 years), a gambler will almost certain to loss money and an investor will almost certain to gain money.

If you don’t have any experience and don’t want to spend time learning about investing, you can also get investment advise from an independent financial advisor (IFA). The cost of advise from an IFA is a lot cheaper than a costly mistake you may make if you are inexperienced and don’t get advise from the professionals.

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I believe you are talking about the Guaranteed Equity Bonds. Stay away from them, your capital is not guaranteed as the name suggested, and there’s also hidden heavy fees in them. Read more at: http://www.learnmoney.co.uk/advice/advice-05.html

I hope you have changed your mind on this after you read the above linked page.