Is Investing Gambling?
Thomas invests in the stock market, but a friend at church says that is like gambling. Dave is happy to explain why he disagrees, and he defines what gambling is.
QUESTION: Thomas in Arizona invests in the stock market, but a friend at church says that is like gambling. Dave is happy to explain why he disagrees, and he defines what gambling is.
ANSWER: He doesn’t get to define gambling. He’s not Webster’s just because he wants to be a cynic. He doesn’t get the opportunity to define gambling. Gambling is defined differently than investing. Whether you want to call an investment high risk and you want to say that risk . . .
You know, I don’t like putting money into gold. I think it’s a bad place to put money, but I don’t call it gambling. It’s an ultra-high risk, volatile investment, but it’s not gambling. It’s a dumb investment. I would tell you not to do it, but it’s not gambling. Gambling is truly a random act of chance—the fall of a card, the roll of a die—those kinds of things. It’s a random act of chance. Investing is not that at all. For him to compare the two is an indication of his personal cynicism. It’s not an indication that you’ve spiritually screwed up. The rate of return is based on something. It’s not based on the random fall of a dice or a card.
He’s full of crap. It’s sad that he’s that cynical and that beat up, but basically he’s decided that Wall Street is the Boogeyman and he can’t define it and he can’t understand it and so he’s got to completely poo-poo it.
If you don’t want to put money in mutual funds because you don’t like the level of risk and there are variables there that you don’t have control over, fine. But that doesn’t make it gambling. It’s not gambling at all. You can study a series of stocks and look at the assets of those companies, the income that those companies produce, the track record of those companies, and as a group in a mutual fund, you can predict that. Is it perfectly accurate? No, but what you’re betting on here, what you’re speculating on, what you’re investing based on is not just whether a horse wins a race or whether a football team wins a game. That is completely, completely wrong to put those in the same category.