At first, you may think that the difference between trading and gambling is clear cut and easy to understand. Once you take into consideration how these two transactions are similar in practice, things become a little less discernible.
The biggest problem is that not having a clear understanding of the lines between the two you are running the risk of legal transgression. So what differentiates your new bitcoin wallet from your stubs for the racetrack?
What Is Investment
One of the key differences between the two lies invested ownership of a unit of measure representing the value by the percentage of investment. This may sound a bit convoluted but if you buy a single share of stock, at the same time you make a bet on the same stock succeeding in the markets. Let us further assume that you stand to make the same amount of profit on either transaction.
Come to the end of the trading period you have been wrong on both accounts, and you lose the value of the stock and bet equally. In the case of a gamble, your investment is lost, regardless of its value, you still own the stock when investing. You should always evaluate the best-performing stocks before investing.
How Is That Helpful?
Next, you may think to ask what the significant distinction is. You have lost your money on both accounts, and now you have one worthless investment. In terms of the purchase of that stock, you do still stand to regain your initial investment or more.
It is not the value of the stock that you had purchased that matters, but the percentage of value as defined by the market value of the investment itself. In other words, you own the unit, not it’s selling price, and the cost remains open to market changes.
And If The Ship Sinks?
So those as mentioned above may be common sense, but what about the eventuality that the investment itself tanks? In this case, one could easily argue the semantics. Using the previous example, you would now have lost both transactions completely, the bet and the stock.
This can happen in high-risk venture capital investments, but it is essential to understand the difference between high and low-risk investment. When you opt for high-risk investment, you tend to see the potential for greater returns, but the possibility of more significant losses.
How Is This Different Than Betting Against The Odds?
The probability of these losses and gains are not based upon the same statistical models as a bet. When you gamble money on a particular outcome, odds are based on recorded success rates. This means that you get better odds for betting against the probable winner.
In high-risk investment, you make a strategic and informed decision based on real-world economics. Just because the last startup to modernise taxi services was a success doesn’t speak to the success of the next, the data works differently and must be inferred from innumerable factors.
Gamble Or Invest?
In closing, we can emphatically say that there is no measure of competition between the two forms of transaction. Gambling is a financially irresponsible decision that is at very best reserved as a hobby, whereas investing can be a vocation when practised responsibly and sensibly.