When GameStop’s stocks went from $18 to $483 in January 2021, many people became interested in investing in the stock market. As thousands of Reddit members gambled on the stocks’ short squeeze, major media houses called Wall Street a casino. This metaphor is apt as it shows that investors and gamblers have a knack for putting their money at risk for a big win. However, there are a lot of things that set gamblers apart from investors. Here are 3 things that differentiate investing and gambling.
Investing and Gambling – Gamblers Don’t Have the Patience Needed to Invest
Unless you’re into high-volume trading, investing is all about being patient. Leaving the exception of GameStop craze aside, stocks aren’t subjected to social media uproar. Instead, they take months and years to show progress, even if you have sound financial and business plans.
Now think about the number of roulette spins and blackjack hands a gambler can play within 60 minutes. A gambler can go through hundreds and thousands of Rupees in one gambling session at an online casino.
Because of this, it’s natural for a gambler to feel restless and bored when they buy stocks. They will keep on refreshing the ‘Positions’ page and desperately wait for the stock’s price to change, adding to their frustration.
Gamblers’ View of Risk vs Reward is Distorted
Casinos publicize the payout odds on different wagers and games. In hopes of attracting new gamblers, they ensure that everyone in the casino knows that you’ll get a 35/1 on the roulette wheel, 9/1 on Sic Bo, and 3/2 in blackjack.
These payout odds get ingrained in the minds of recreational gamblers. However, they don’t realize that rolling 4-4 in Sic Bo may happen once in 10 rolls. With true odds of 10/1 and inferior odds of 9/1, Sic Bo players don’t get the appropriate return comparable to the risk they may incur.
On the contrary, these values don’t apply to the stock market. The money you risk will either give you a return, or it won’t. The return can be double, triply, or ten times, but one can’t determine the outcome with any certainty.
Gamblers Like Short-Term Wins Over Long-Term Stock Plays
Slot machines attract thousands of gamblers because they provide a chance for them to win a life-changing and massive jackpot.The slot machine may land a jackpot in 1 out of 49,836,032 spins. Despite this, gamblers keep spinning the slot machine in the hope of landing a jackpot in the next spin.
For a gambler who chases such short-term wins, the idea of waiting for indefinite periods to see their stock’s price rise doesn’t sound appealing. It’s because they’re interested in quick home runs and the thrill that gambling brings with it.
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