Taking the Gamble out of Gambling
the stock market as investing is because there is proof available to us via the media, and
even perhaps friends or relatives have made some money in the stock exchange.
When we think of traditional gambling mediums however most of us usually know
many people who simply loose money via these methods and rarely have any form of
return. Let’s consider the other aspect though. Are there people who make a full time
income from traditional gambling mediums? The answer is, absolutely YES. Are these
people exceptionally lucky in some way to the point where they can make a good income
from traditional gambling? No, absolutely not. You’d have to be the luckiest person in
history to be able to make an income from gambling simply by luck alone. So how does a
professional gambler make an income from gambling if it’s not by some magical talent or
luck? He does it in the same way that a professional stock market investor does it. To
understand how though, we first need to understand the real distinction between
gambling and investing.
The Real Difference between Gambling and Investing
So what is the real difference between gambling and investing? Firstly, gambling is
placing money on a game of chance or activity with random outcomes using selection
methods with no sound reasoning behind them or historical data to draw a conclusion
about the particular selection method. These methods can be using favorite numbers or
colors, birthdays, favorite jockey, name of a horse, or the “someone told me” system.
There are an almost endless variety of methods that gamblers use to make selections.
Gamblers almost always have another couple of traits as well. Namely they expect an
enormous return for a small outlay, and they rarely manage there gambling money or set
aside a bank of funds to gamble with.
A professional investor on the other hand uses proven data and research to make selection
choices, works his investing as a business, sets aside a working bank of money for
investing, expects to make small to medium returns which he then compounds to build
his working bank, and uses common sense risk management to limit the risks with any
single investment. Basically, an investor educates himself in the area he wishes to invest
and then makes educated decisions when placing investments. An investor also does
other things that a gambler doesn’t such as have a set “bank” of money to invest with and
manages that bank in a business like manner. He also does a risk assessment to limit his
liability on each investment.
In a nutshell a successful investor in anything does these things:
1. Educates himself about the investment medium.
2. Invests in his education by obtaining trusted and relative information.
3. Learns and applies prudent money management skills to limit risk and smooth
out fluctuations in returns. (Every form of investing including stocks has
fluctuating returns. A period of unusually high returns should not temp you to
make risky choices any more than a period of low or negative returns should
temp you to cease your strategy because of fear. Providing that you have a