Tuesday, February 15, 2011

Investing or Gambling? Part 1: Introduction

The New York Stock ExchangeImage by BlatantNews.com via Flickr
When we first created our website and blogs, we strongly believed that playing the lottery was not gambling. Our thought was that since the chances of winning a jackpot prize was so small, one could not realistically gamble on their winning. To us, gambling involved having a reasonable expectation of winning. In games such as Powerball and Mega Millions, it is nearly impossible to have this expectation. Thus, we concluded, these games were not gambling.

However, as we began to study smaller games, such as the Pick 3, we realized that given the right circumstances, a player could achieve a reasonable expectation of winning. In these cases, we do not believe one can expect to receive a mutli-million dollar windfall, but perhaps a continuous 10% or 20% return was possible.

Considering these realistic return percentages, we began to compare realistic returns that investors achieve in the stock or other markets. In good times, a stellar fund may reward investors with similarly high rates of returns. So we wondered:

Can Gambling be Considered Investing?
Is Investing Gambling?

To help understand these answers, we have decided to write an investigative comparison of both gambling and investing.

In the issues that follow, we will present:
  1. The definitions of investing and gambling
  2. Outline why this topic is important at this time
  3. Identify the differences between the two of these
  4. Present examples of successful investors and gamblers
  5. Examine various gambling games and investment options
  6. Look at the profile of a typical investor and gambler
  7. Compare the mathematics involved in both disciplines
  8. Consider whether the outcomes can be manipulated
  9. Conclude by quantifying whether investing is also gambling.
During the next 9 weeks or more, we will address each of these topics in detail.  We will try to illustrate the differences between the two concepts and reinforce why all folks should be conservative with their investments. At the end of this series, we will, hopefully, reach a solid conclusion about whether investing may also be gambling; and perhaps more importantly, why you should even care.
Enhanced by Zemanta

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...