Do you know that the existing western capital markets are being compared to the large casinos and the investments made in the different trading securities to gambling?

Well, some people generalize from specific cases and speculate from certain investor behavior that gambling has become the custom in financial markets.

The Differences

The basic of gambling is, when a person gives money for a specific purpose there is a chance or probability of receiving back more money. For example, on spinning a roulette wheel, how likely the ball lands in a yellow slot marked fifteen.

  • The outcome is purely based on probabilities.
  • Further, there exists no such underlying items or service to be exchanged in a gamble.
  • After this specific gaming activity, the only concern will be whether our pockets contain either more or less money than when we entered. Thus, the existence of gambling depends truly upon a single party winning at the expense of another one.

Summing up all these considerations, we can comment that gambling is some sort of entertainment.

The fundamental form of investment consists of an investor providing minimum money to a business manager in exchange for money flow in future. This surely requires

  • an appropriate knowledge relevant to the venture outcome
  • a better understanding of the reason for their investment

Apart from these, the other ways by which it can be compared with gambling includes

  • An asset may be goods or service is purchased in an investment and hence it depends upon the value of underlying securities.
  • Both the parties including business person and the investor agree to the transaction only because of the thinking that is it a safe and mutually beneficial process.

Even though gambling and investing are dissimilar in many ways, there are some common threads joining them like

  1. Risk factor:
  • There is an element of uncertainty regarding the value of an asset in the present and future. However, the investor or speculator has an ample opportunity to leave the investment for the time-being, if the asset value is observed varying tremendously.
  • In contrast to this, for a gambler, the monetary status is instant with no exit potential.However, strongly believe that the more risk a transaction has, the more return can be expected
  1. Faith:
  • The traders invest their money relying upon the intermediates like brokers and others who regulate the markets and hope they will conduct with honesty and integrity favoring
  • Gambling also involves such a faith or ray of hope of winning the game by choosing the correct possibility from the probable outcomes.

 

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