Many investors believe that playing the stock market or plowing money into a new company is similar to gambling. There is plenty of truth to that statement as people deal with unknowns and variables when they undertake such activities.
The significant difference between gambling and investing is that investments typically bear positive expected returns over the long term, whereas gambling does so in a much shorter time. Here are some similarities between investing and online betting:
Both online sports betting and investing require an initial investment of money, with the expectation of a return. It is unwise to spend amounts that you cannot afford to lose as there is every chance you could walk away with nothing.
Before committing any money to an investment or sports bet, evaluate your risk capital against the potential risk-reward ratio. This determines if it is worth putting your money on the line.
A game of chance
Both bettors and investors spend a considerable amount of time weighing up the relative merits and demerits of betting or investing. This means examining the odds of a team or player winning based on prior performance for sports wagerers. Investors also study a company’s past activities to determine the risk of spending their money on stocks.
Investors and bettors sometimes find opportunities to speculate and accumulate funds by spending money on relatively unknown teams, players, or companies. Many entrepreneurs develop exciting business ideas in new niches and markets. New sports, such as esports, come with new competitors. Putting your money where your mouth is in such instances is a high-risk endeavor, although it has some potential to yield significant results.
Knowns and unknowns
Adding to the risk factor of any bet or investment are extraneous factors that could change a situation within seconds. A sudden market collapse could spell disaster for investors, while bettors could lose everything due to a star player’s injury.
Many investors who have opted for crypto trading have seen their portfolio value fluctuating wildly due to circumstances beyond their control. It takes nerves of steel to hold onto their cryptocurrency and wait for the market to recover. This occurs over many months, whereas sports bettors have only the duration of a game to see things change.
While bettors and investors might take extreme risks in some activities, they understand the value of a balanced portfolio. Investors might engage in high-risk investments but balance them with more stable options that will yield positive returns.
Frequent sports bettors also play it safe with some of their wagers, betting on a sure thing to keep winning. They use their profits to bet on riskier endeavors, hoping for a big score.