How many times have we heard that investing in Stocks is similar to gambling? The usual argument is that the market (stocks) is rigged in some ways and that only the rich are the ones making money.
The article will focus on the public markets such as the NYSE, NASDQ, S&P, CRYPTO, etc. We will not include investing in any kind of startups which can include but no limited to AI companies, software, hardware, service sector, and any bricks and mortar establishment. If I was to compare Casino/Online Gambling it would be for most startups which have a high percentage of failure. But this is a whole other subject and article.
Is Casino and Online Gambling similar to investing in Stocks and Crypto?
Trading stocks and cryptocurrencies is not the same as gambling at a casino or online, despite some surface similarities due to risk and volatility. Key differences include market regulation, ownership, transparency, and the potential for informed decision-making based on analysis rather than pure chance.
Stocks represent ownership in businesses with asset backing and long-term growth potential, while cryptocurrencies have underlying technology and use cases that can add intrinsic value beyond speculation. In contrast, gambling outcomes are almost entirely based on chance with fixed odds and no ownership or long-term accumulation of value.
Additionally, trading and investing occur within regulated markets promoting competition and transparency, with profits subject to taxation, unlike gambling winnings. While speculative trading and day trading in both stocks and cryptocurrencies can resemble gambling due to high risk and short-term focus, strategic investing relies on research, fundamentals, and risk management to increase chances of success.
Thus, trading stocks and cryptocurrencies may involve risk akin to gambling, but their foundation in regulated markets, potential for value creation, and skill-based strategies distinguish them from casino gambling
How do Risk Profiles differ between Investing and Gambling
Risk profiles between investing and gambling differ fundamentally in terms of control, predictability, and expected outcomes.
Investing risk is often quantifiable and can be managed through diversification, research, and strategic planning. Investors analyze market trends, company fundamentals, and economic indicators to make informed decisions, aiming for positive long-term returns despite short-term volatility. Risk is mitigated by spreading investments and using financial tools, with an expectation of growth over time.
Gambling risk, on the other hand, is typically binary and based mainly on chance, with outcomes that cannot be influenced once a bet is placed. The odds favor the house, making expected returns negative for players. Gambling is generally short-term with high volatility and no sustainable value creation or risk management beyond bet sizing.
In essence, investing involves calculated risk with tools to influence outcomes and preserve capital, while gambling entails high-risk exposure with limited control and a higher likelihood of loss.
How do Long-Term stock returns compare to the odds at Casinos?
Long-term stock returns and casino odds differ greatly in their expected outcomes and mathematical foundations.
Stocks generally offer positive expected returns over the long term, driven by economic growth, company profits, and dividends. Historically, broad stock market indexes have returned an average of about 7-10% annually after inflation over several decades. This growth compounds, allowing investors to build wealth over time despite individual market fluctuations.
In contrast, casino odds are designed to give the house a built-in advantage, known as the “house edge.” This edge ensures that, on average, players lose money over time. Unlike stocks, casino games have negative expected returns for players, making them a losing proposition in the long run.
Therefore, while stock investing offers the potential for wealth accumulation with positive expected returns, gambling through casino games statistically results in losses over time due to unfavorable odds.
Is it possible to make a living being a Professional Gambler?
Yes, it is possible to make a living as a professional gambler, but it is challenging and requires skill, discipline, and effective money management. Professional gamblers use methodical strategies, deep knowledge of games like poker or sports betting, and sometimes advanced data analysis to gain an edge over the odds. Their earnings can vary widely—from modest incomes around $50,000 to six- or seven-figure annual salaries for elite players. However, only a small fraction of gamblers achieves consistent long-term profitability, and the occupation involves significant financial risk and psychological pressure. Successful professional gamblers treat it like a serious career, applying strict bankroll management and maintaining emotional control under pressure to sustain their income.
Is it possbile to make a living as a professional Stock Investor?
It is possible, but success depends on experience, skill, market knowledge, and capital. Professional stock investors, including stockbrokers and portfolio managers, can earn substantial incomes through a combination of base salary, commissions, performance bonuses, and sometimes profit sharing.
Entry-level stockbrokers often start with salaries around £25,000 to $30,000, but experienced professionals working in large firms or financial hubs can earn between £100,000 and £150,000 or more annually, with additional bonuses often significantly boosting total compensation. Success as a professional investor requires not only investment acumen but also client management, networking, and consistent performance over time.
Independent professional investors relying solely on their portfolios face higher risk and uncertainty but can generate significant wealth with disciplined strategies and sufficient capital. Overall, professional stock investing is a viable career but demands continuous learning, risk management, and resilience.
Conclusion
Gambling as well as investing involves a level of risk. For gambling (brick and mortar casinos) the “House” will always be the winner. It might not be in the short-term, but eventually the House will always come up on top. Remember, those Casino were not built by winners but by the millions who lost their money.
Investing in the market does provide better odds and in most cases is not “fixed”. Historically the markets have risen in the long term. But with any investment there is risk involved and, in most cases, the higher the returns the bigger the risk. Millions have been made and lost in the market, but it is wiser to invest then to play a game where mathematically the odds are against you.
