Join us today for an episode about the reason we need to understand the difference between investing and gambling...
Today's episode is focused on the real difference between investing and gambling....
In today’s episode about investing in others through stewarding your treasures, I talk with you about the difference between investing and gambling. Why the big difference is one of risk and odds. I also share why we often see the winners in gambling but never the losers and that bias clouds our vision.
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Episode 805 Investing Versus Gambling
[00:00:00] Scott Maderer: [00:00:00] Thanks for joining me on episode 805 of the inspired stewardship podcast. Paul sawn from Kara. I challenge you to discover your true identity and calling so you can be empowered to live everyday to the fullest. One way to be inspired to do that is to listen to this, the inspired stewardship podcast with my friend, Scott Mader.
[00:00:29]Too often, if you try to do anything with the attitude of doing it quickly, it ends up creating longterm problems. But if you recognize that it's going to take you time to do it, then you get long-term benefit. Short term pain often leads to longterm benefit. While long term pain is created by looking for the shortcuts.
[00:00:52] Welcome and thank you for joining us on the inspired stewardship podcast. If you truly desire to become the person [00:01:00] who God wants you to be, then you must learn to use your time, your talent and your treasures for your true calling in the inspired stewardship podcast. We'll learn to invest in yourself, invest in others and develop your influence so that you can impact.
[00:01:17] The work
[00:01:24] and today's episode about investing in others through stewarding your treasures. I talk with you about the difference between investing and gambling. I share why the big difference is one of risk and odds. And I also share why we often see the winners in gambling, but never the losers and why that bias clouds, our vision.
[00:01:45] As we talk about stewarding your treasures. Wouldn't it be great. If you could support this podcast and do it without costing yourself an extra dime. It turns out you can. All you have to do is use inspired [00:02:00] stewardship.com/amazon. When you're ready to make a purchase via Amazon and a small commission, we'll come back to support the show.
[00:02:07] If you enjoy the show, when you're ready to buy from Amazon, just use inspired stewardship.com/amazon. So not too long ago, there was all sorts of news about what was happening with the stock market. In terms of this group investing in a particular stock for the GameStop. Sort of stores and about how some people made millions during this and about how, we should all be investing like this in single stocks.
[00:02:38] And that was the big guy being taken down by the little guy and all of those things. There's accuracy in some of the feeling and some of what was going on. And. Some of the reaction, but it brought to mind to me, one of the conversations that I hear about people when we start talking about investing for the future, and it's this idea that investing in [00:03:00] the stock market or in real estate or whatever it is, some form of investing is just like gambling.
[00:03:07] Especially investing in the stock market, investing in mutual funds or index funds, or even buying single stocks. And people will talk about it as being just like gambling. It's just like going to Las Vegas and betting on the roulette table. But the truth is that gambling and investing are not the same thing.
[00:03:28] Oh, sure. There's some similarities. In both investing in gambling, you risk some sort of capital in some sort of investment, some sort of monetary thing with the hope that you will make a profit over time and in both gambling and investing, you want to minimize your risk while maximizing the amount of return, maximizing the money that you get back while reducing the amount of risk.
[00:03:59] That's the [00:04:00] similarities, but the truth is there's huge differences to gambling by definition is set up in a way where you have fewer ways to mitigate loss and to control risk. There's more odds to it that are stacked, where over the long time they work against you. And yes, there are some skills you can learn.
[00:04:23] Professional poker players learn ways to play the game and increase their odds, but they're still a certain amount of just luck involved too. Now stock market, you have to learn something about what you're doing. You have to gain knowledge, but the truth is there's more information that you can gain about the stock market or about real estate are about other investing tools.
[00:04:47] You can learn more about them and therefore over a long period of time as an investor, the odds are in your favor. Wow with [00:05:00] gambling over a long period of time, the odds actually go worse against you. Statistically, the casinos that you see in Las Vegas were built using the loser's money. And that means given there's this huge hotel, there has to be a lot of losers for every single winner, risk and return.
[00:05:22] Go hand in hand with investing in generally the higher, the return. The higher, the risk. That's how that works. If you're only looking for small returns, then you can do something that has smaller risk. If you want larger returns, then you end up with larger risk and you have to balance that depending on your own personal situation, there isn't a one size fits all answer that fits everybody.
[00:05:52] Now gap gamblers of course have to also be careful about what they're doing because there is an event [00:06:00] here that has a highly unlikely outcome. There's chance involved. That's why it's called gambling. And there are things you can do of course, to mitigate your risks there too. But you're very limited in them.
[00:06:13] And over a long enough period of time, those odds will always play out against you. Gambling has this mindset of I'm going to go all in and win big. Right now it's a time factor we're investing is about the fact that over a long enough period of time, I will make some money. So the truth is they're not the same at all.
[00:06:38] There's always going to be differences, practical differences, as well as mind set differences. See the truth is. That they're looking at the risk and reward of investing makes you realize that you've got to take your time. That there's a turtle approach. That the one that takes the most time and gains the most information [00:07:00] actually is going to come out ahead.
[00:07:02] But what happens is we hear about a story like the one from a few weeks ago, and we hear about somebody that made $50 million real quickly, overnight in a stock investment. And they took a high risk mentality with that investment. Even if they'd gathered a lot of information, the single stock has a certain amount of risk inherent in it, but they won big.
[00:07:26] Or we hear about a day trader who constantly is flipping stocks and buying the latest, hot idea. And they're making money. We hear about the people that bought Apple 20 years ago and did well. And we hear about the people that gamble and win too. They go to Las Vegas and they bet it all on the. Road roulette table.
[00:07:45] And they come home with thousands of dollars more than they, they left with. They win it big in gambling. In fact, I would say I'm going to all of these cases sometimes when that win happens early, like that. It's one of the worst things that can [00:08:00] happen because it begins to cloud your vision. When you hear those stories, you think that's the way to do it.
[00:08:06] I have to bet big. That's the only way to win. And you don't pay attention to the literally thousands and thousands of people that make those bets, but actually lose every single day. You don't pay attention to the people that don't win. We ignore the losers. And we ignore the people that win by playing the game a different way by being the slow and steady investor, by taking the long-term mentality all too often, if you try to do anything with the attitude of doing it quickly, it ends up creating long-term problems.
[00:08:42] But if you recognize that it's going to take you time to do it. Then you get long-term benefit. Short term pain often leads to long-term benefit while long term pain is created by looking for the shortcuts. Oftentimes [00:09:00] more often than not this attitude and this bias is something that we have to recognize.
[00:09:05] And when we do, then we can step forward, recognize the difference between investing in gambling and do the practical things today. That set us up for success. Yes. Over the longterm. Thanks for listening.
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In today's episode, I talk with you about:
The individual investor should act consistently as an investor and not as a speculator. — Ben Graham
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