Are You an Investor or a Gambler?
An interesting debate arose here this week regarding the differences and similarities between investing and gambling. This debate is largely semantic and arriving at an actual definition of investing or gambling, in my humble opinion, is almost as subjective as the meaning of happiness.
Perhaps most would agree that the primary commonality of investing and gambling is the wagering of money on an uncertain outcome; therefore, one could argue that the two words share the same general meaning with regard to the underlying respective wagering activity [Note: Of course one may debate the differences in meaning between 'investor' and 'trader' as well but for purposes of this post, we’ll assume that traders are investors].
Differentiating between the two, whether one is an investor or a gambler, therefore, may simply be found within one’s self-perception of their motivation with regard to the wagering activity (assuming an honest self-reflection and resulting self-assessment is possible).
Personally, I like to employ the use of timeless wisdom, as opposed to conventional wisdom, for points of reference:
A given man lives a life free from boredom by gambling a small sum every day. Give him every morning the money he might win that day, but on condition that he does not gamble, and you will make him unhappy. It might be argued that what he wants is the entertainment of gaming and not the winnings. Make him play then for nothing; his interest will not be fired and he will become bored, so it is not entertainment he wants. A half-hearted entertainment, he must delude himself into imagining that he would be happy to win what he would not want as a gift if it meant giving up gambling. ~ Blaise Pascal
Blaise Pascal, who is best known for “Pascal’s Wager,” seems to suggest, and I concur, that the “entertainment of gaming” and “the winnings” are not mutually exclusive motivations of the gambler: Take either of them away and the gambler is unhappy.
Perhaps the definition of gambler, then, might be “one who wages money on an uncertain outcome and, with regard to the particular wagering activity, is motivated both by the entertainment of gaming and the prospects of winning; but not one without the other.”
In my own personal reflection, for example, I believe I would label myself as an investor. I say this because, if I were offered a modest rate of return, of say 8% annualized for life with no possibility of earning more (or less), I would take the offer and move on to other pursuits (that would not include gaming of any sort). In other words, I do seek “the winnings,” which I would define as outpacing inflation by a significant margin, but I could care less about “the entertainment of gaming.”
How about you? Do you seek entertainment from investing/trading or do you engage in this wagering activity for the winnings (or both)? Following this exercise, you might be a gambler if you would be unhappy having only one without the other (entertainment/prospect of winnings).
What do you think? Are you an investor or a gambler? Why or why not? How do you personally differentiate between the meanings of investor and gambler?
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Kent Thune is blog author of The Financial Philosopher
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September 4th, 2009 at 10:25 am
It’s not gaming when you use magic charts. They’re real.
September 4th, 2009 at 10:26 am
IMHO – 75% of myself is in it for the winnings (retirement, easy life, etc) but 25% of me is in it for the vanity and recognition of colleagues of being “smart.” There is a faint difference to me between investing and gambling. Gambling is 50/50 chance (depending on the game). Investing is slightly better odds due to the “buy and hold” mentality and the physological effect of inflation. The “long term inflation rate” allows you to always hold an asset until it’s price has gone up; although, the purchasing power hasn’t changed. It’s a nice warm fuzzy that after holding on to a house for 30 years, you aren’t selling it for the same “price” as what you paid for it. The increase in the face price of it helps you feel like you made a smart investment even though you may have not got a ROI. Investing is structured to give you that warm fuzzy, hold it long enough and you’ll make a profit. My two cents…
September 4th, 2009 at 10:26 am
Maybe its like the difference between erotic art and pornography. You know it when you see it ;-)
September 4th, 2009 at 10:27 am
How can anyone truly think they’re “investing” for the long term in this bizarre environment?
September 4th, 2009 at 10:36 am
You’re answer I would guess is premised on having the money such that 8% provides a lifestyle you desire and are happy with. Which from a gamblers standpoint just means, quit while you are ahead, don’t give back the house money. I once was an investor, now IMHO it’s all a gamble the balance sheets make zero sense on the ties that bind, so the outcome is pre-ordained unless they change laws, it’s now a question of timing, and when standing near the edge betting on the timing is not a good wager, so I dink and dunk, scalp here, scalp there, which is gambling yet a complete loss of the wager has no bearing on my lifestyle, it is far more enjoyable than mowing lawns.
September 4th, 2009 at 10:41 am
I think the difference is the zero sum aspect of gambling that need not exist in investing. Good investing not only takes advantage of natural rates of growth but can also take advantage of investing in entities that create value by recombining inputs into a sum greater than the constituent parts.
The other aspect is the likelihood of actually gaining an edge over the base case likelihood of outcomes. Gambling, pure gambling, there is no possibility of an edge, although people imagine there can be all the time. In investing, value investing, it is possible to get an edge. There is no such thing as value gambling.
Still the way a lot of people invest looks like gambling to me, but it could be because I do not understand their edge, or it could be because they just plunk money down and hope it will go up instead of down.
This is subject near to my heart as my wife always knows how to infuriate me whenever I make the mistake of telling her about a successful investment. She just rolls her eyes and says, it is just like gambling, meaning I just got lucky, so big deal.
September 4th, 2009 at 10:50 am
The farmer invests in a plow and ox so that he can produce more wheat. He invests in a mill to grind the wheat faster. He invests in a cart to be able to transport his wheat to markets further away. Investments are aimed at ‘making the pie bigger – or making more pie’, while gambles are about getting the existing pie from someone else. Speculation is akin to gambling in this definition, and could be someone who buys the cart only hoping that someone else will soon pay more for it. The connection between the ‘investor’ and the application of that investment to a useful end has too many interchanges and has become too muddled.
September 4th, 2009 at 10:51 am
Dickson Watts addressed this issue in the classic book ‘Speculation as a Fine Art and Thoughts on Life’ (which heavily influenced the legendary success of Edwin Lefevre and his book famous ‘Reminiscence of a Stock Operator’.)
“Speculation is a venture based upon calculation. Gambling is a venture without calculation.”
http://greenfaucet.com/fundamentals/speculation-as-a-fine-art-part-1/19096
September 4th, 2009 at 10:56 am
First, you have to differentiate between the different types of gambling: dice, cards, horses, sports, boxing, etc. Some require an educated mind to be successful. Some of the more gifted minds get black listed from the tables in LV, for example. For me, investing is “educated” gambling.. however, I am not a gambler and you would never find me at any casino table or slot machine. I have played poker and cards for “fun” with friends, but I wouldn’t actually pay for big money. Cards are more about winning than money for me.
September 4th, 2009 at 11:02 am
First, you have to differentiate between the different types of gambling: dice, cards, horses, sports, boxing, etc. Some require an educated mind to be successful. Some are pure chance. For instance, some of the more gifted minds get black listed from the tables in LV. For me, investing is “educated” gambling.. however, I am not a gambler and you would never find me at any casino table or slot machine. I have played poker and cards for “fun” with friends, but I wouldn’t actually pay for big money. Cards are more about winning than money for me. Likewise, if I were to bet on a horse or sport outcome, it would be more about the “fun” than the money. Then, again, I don’t bet, and don’t need to bet, to make a win more thrilling.
September 4th, 2009 at 11:08 am
The gambit is that people who spend too much end up being owned by the thrifty thus to invest accordingly.
It is the government’s role to redistribute those flows in order to end up owning both.
September 4th, 2009 at 11:11 am
hmmmm… would that 8% be over and above inflation?
September 4th, 2009 at 11:14 am
wally @ 11:11
You beat me to the post.
If we get 70′s-style inflation, 8% nominal won’t look so good. (And then there’s taxes….)
September 4th, 2009 at 11:24 am
Interesting and possibly relevant to this thread quote from article in yesterday’s NYT on High Frequency Trading:
“The markets used to be about capital formation,” said Mr. Quast, the consultant. “Now 80 percent of trading is driven by some form of statistical arbitrage. We are buying into a statistical house of cards that could unravel very quickly.”
http://www.nytimes.com/2009/09/04/business/global/04optiver.html?_r=1&em
September 4th, 2009 at 11:26 am
worker drone using whats affordable and available
hey KeithO & Glenn .. just found this .. another presentation at the commie plaza
http://www.youtube.com/watch?v=hBDtZqwLiLs
Stay In Time
better sound via WGNtv studio:
http://www.youtube.com/watch?v=tXT5N9H7sFk
Happy Labor Day Weekend America :-)
September 4th, 2009 at 11:43 am
Well, Jack McHugh posted something on the BP the other day about investing in value….I posted a note that said that market timing the last 20 or so years meant everything, and value meant nothing..he and I posted a few e-mails back and forth on the subject.
…But think about it…in equities…tech bubble told you that value meant nothing..if you timed the market and got in and got out when you were supposed to…you made money..
Spring of 2003…same thing..
Timing the current market…getting out…getting back in…all a matter of gut feeling and timing…not really value at all…
You could call the value oriented “investors” and the timing oriented “gamblers” if you wish….but it is 6 of one and half dozen……you know….
September 4th, 2009 at 11:51 am
Investing is when you partner with somone or something, wishing to share in the profits accruing to an enterprise that is creating value, i.e., making or doing something people value highly.
Gambling, or speculating, is everything else.
September 4th, 2009 at 12:00 pm
I’ve pondered this same question myself.
To investing and gambling, I would add insurance. My life insurance is a $1800 bet that pays off big if I die.
I often wonder how legislation created to regulate one of the three manages to exclude the others.
September 4th, 2009 at 12:03 pm
It seems useful to define gambler, speculator (trader) and investor. I would suggest a gambler is one who wagers on an uncertain outcome where the statistical odds are against him or her. A speculator is one who wagers on an uncertain outcome where the statistical odds are in his or her favor. An investor is one who devotes capital to a venture where a return is created and the value of the venture is subject to the return created over the long-term.
This defination makes everyone in a gaming establishment a gambler. It also makes most participants in the financial markets gamblers. It also implies most “investors” are simply long-term traders. The farmer winstongator highlights above is an investor, as is his relative or neighbor who invests in his venture so he may purchase tools and seed. The person who simply purchases the farmer’s neighbor’s investment in the farmer’s venture is a long-term trader.
September 4th, 2009 at 12:05 pm
Here’s the chart of the day to prove that we’re all gamblers now. Absurd doesn’t even begin to describe it.
http://1.bp.blogspot.com/_nSTO-vZpSgc/SqCiLW9lQ2I/AAAAAAAAGzI/DBHBZRH7ilM/s1600-h/S%26P+PE+Ratio.png
September 4th, 2009 at 12:07 pm
Nearly everything embraced today is gambling. Investing is a bottoms up approach to fundamental analysis which seeks income return of a fairly valued asset. Fairly valued would be close to replacement value or intrinsic value. Would someone please tell me how derivatives and momentum strategies embraced by financial pinheads today has any relevance to investing? Many of the traditional (a hugely dying breed) bond investors fit this bill. Anyone investing in stocks right now is a complete and utter idiot. There aren’t ten S&P companies that fit the bill of an investment today. And because not one in one thousand people on Wall Street could actually do a fundamental analysis of a company, what do we expect? This is all just a symptom of the money bubble that is collapsing around us.
September 4th, 2009 at 12:09 pm
Bruce
There hasn’t been real value in the stock market at large since the ’80s. In other words that you could invest and get a good long term return on your money without worrying about timing the market. But that depended on timing as well. You had to be disciplined enough to stay out of the market until real value showed up before investing. Otherwise your timing had to be good; i.e. in the ’70s. Real good value only shows up every once in a while. Even though the finance world has propagandized most people into thinking you should invest without regard to value; i.e. dollar cost average, buy and hold. If you’re lucky your timing is good and you get a good return. If you’re not lucky…
Sorry for the topic drift.
September 4th, 2009 at 12:11 pm
Actually, I’d consider myself both. In 2001, I picked up a few hundred shares each of Tesoro, Air Tran and E-Trade (there were a couple of others whose names I don’t remember) when they were all in the $2 range. My minimum gain was 500% and on TSO my gain was 2500% when I sold it. In 2003, when it became clear to me that Easy Al was going to keep rates low I picked up some precious metals. In 2004, I bought some more. I don’t own any stock now…too many shenanigans going on, HFT, day traders but I’m still holding several hundred ounces of the metals.
September 4th, 2009 at 12:11 pm
bdg123
Well said.
September 4th, 2009 at 12:11 pm
My annual purchase of my favorite sports teams’ season tickets is more akin to an “investment” than any “investment” in the farce otherwise known as the “stock market”. I’ll let you all figure out why.
September 4th, 2009 at 12:14 pm
Investing is purchasing a stream of future cash flows at a reasonable price.
Speculation risks money in anticipation of a profit, on average.
Gambling risks money hoping to achieve the wager’s payout.
Gambling and speculation do not require value while successful investing means purchasing the cash flow at a reasonable price.
September 4th, 2009 at 12:55 pm
[...] Are you an investor or a gambler? (Big Picture) [...]
September 4th, 2009 at 1:30 pm
In gambling, even if one has perfect knowledge of all the information that has been revealed, one cannot predict what will happen. If I play Texas Hold’Em, and I can SEE everyone’s cards, I cannot predict what will happen with perfect accuracy unless I know what card will be dealt next. I know what I know: I know what I don’t know. All the players in the game, including the house, are on an equal footing – they know what they know, they know what they don’t know, what happens next is (or should be) purely random. Add to that, that you always have perfect knowledge of what the next significant event will be – it’s the next turn of a card, or throw of dice.
In investing, there can be no such thing as perfect knowledge AND what happens next is not random, or at least not very much so. It is largely a factor of human agency. It is possible to enumerate SOME of the things you don’t know, but not all of them. It is impossible to know that, suddenly, factors that were once considered unimportant are now dominant. It is clearly the case that not all the players have equal knowledge (of facts – I ignore opinion) or equal access to what is next (we don’t all have HFT facilities).
Interestingly, in investing there is also the case that sometimes knowing TOO MUCH can have an adverse outcome (insider trading).
It is a situation where knowledge helps (but does not assure), and access helps (but does not assure), and so on. “The race is not always to the swift, nor the battle to the strong, but that’s the way to bet”.
It does mean that a truly cognizant investor cannot know if they are smart, or just lucky. A truly cognizant gambler can know for sure if they are dumb – and they can know if they are lucky.
September 4th, 2009 at 1:37 pm
I don’t believe it’s a semantic issue at all. Rather, I think the issue goes right back to the original post on Information.
Instantaneous communication and the democratization of information renders what were once Investments into what are now Gambles. The Information that confers an edge are like quantum particles with a nanosecond shelf-life. Thus, the vast majority of retail “investors” have no reasonable expectation of the steady 8% returns to which you refer. In fact, the steady 8% to which you refer is so unrealistic…only those falling for the charms of Madoff would succumb to such a fantasy.
If there was any place in the market where one could depend on 8% returns…especially in this environment…there would be such a stampede of hot money into that sector that 8% would quickly turn into 25% which would, of course, just as quickly morph into -50%….Hence you gotta get in and get out and time it just right and depend on volatility, etc., etc…and you are gambling.
Look at the sophisticated indicators available to the average retail investor nowadays…Smoothed Exponential Moving Averages, Fast Stochastics and slow ones too. RSIs, RMIs, and MACDs….These are all forms of Information. Sophisticated Information.
And none of them work.
Sure, you might get lucky…and one (or a combo) will work for a little while…but then…equilibrium returns and you might as well be flipping coins.
So most retail “investors” chase the next “edge”…like an inveterate gambler in search of The Iron-Clad Lock of the Week…searching for that elusive bit of information that will bring success.
People get deluded because many of these indicators actually did used to work. But when they actually worked, they were cutting edge and not generally available to the average “investor”. Once they became available to the average investor and were employed en masse….
….The cutting edge quant hedgies had already moved on…and now they laugh at the adorable, innocent retail sucker buying the SPY because of a stochastic crossover.
It’s this sophisticated information that used to be exclusive and inaccessible…now available at a broker near you that gives the retail gambler the impression that he really is investing. Unfortunately, the vast majority of the retail Wall Street Playas watching CNBC and “investing” with their ScottTrade Accounts are simply getting played by Wall Street.
Entertainment value and the gambler’s high (or low) has nothing to do with the blurred line between retail “investing” and gambling.
Most of today’s retail investors have no reasonable expectation with regards to these “investments; hence they are gambling.
And even if there is a distinction between retail investing and betting on the NFL…you have to admit– it is a fine line with significant overlap.
Why, then, would words like “Gamble”, “Bet”, “Luck” and “Chance”, be so taboo amongst the good Disseminators of Information…From the Abbey Cohens at Goldman Sachs…to CNBC…to the Wall Street Journal and Forbes…to ScottTrade and Schwab…?
Because there are some powerfully vested interests who will make damned sure you feel good about those “investments”…and that you didn’t just gamble away 10k on the basis of their analysis that MSFT is undervalued.
No, you didn’t gamble and lose…you just “invested and happened to lose”…and it is this distinction that turns the retail investor into Robert Frost staring at a fork in the road …convincing himself that it really was an “investment”…
…and it is this distinction that has made all the difference.
September 4th, 2009 at 1:43 pm
“My life insurance is a $1800 bet that pays off big if I die.”
But not to you. And I assume that’s an annual figure. Just remember what an old cowboy once told a young gun: “Son, you should never be worth more dead than alive.”
September 4th, 2009 at 1:45 pm
@Dan Duncan: Well put. I totally agree.
September 4th, 2009 at 1:50 pm
“There is a faint difference to me between investing and gambling. Gambling is 50/50 chance (depending on the game). ”
Actually there are some really smart folks who can “count cards” and beat the house. But they’re thrown out by the casinos. Can’t lose the house edge you know.
September 4th, 2009 at 1:51 pm
The meaning(s) of many common words that shape human behavior are so fluid and abused that they border on abstract and illusion.
“Man acts as though he were the shaper and master of language, while in fact language remains the master of man.” ~ Martin Heidegger
I’ve enjoyed observing the discussion and debate. Thanks to Barry and to all…
September 4th, 2009 at 1:56 pm
I’m a trader and agree with your definition of “gambler”. Successful trading is dreadfully boring and all about the “winnings”
P.S. And I’d like to thank all of the market gamblers whose money I’ve taken : )
September 4th, 2009 at 1:56 pm
“There is a faint difference to me between investing and gambling. Gambling is 50/50 chance (depending on the game). ”
Actually there are some really smart folks who can “count cards” and beat the house. But they’re thrown out by the casin@s. Can’t lose the house edge you know.
(Damn, had to repost this because I used the verboten word, casin@s, but spelled correctly, and it was eaten.)
September 4th, 2009 at 2:21 pm
OT:
The Curmudgeon has a request for all the TBP posters, and the big kahuna, Mr. Ritholtz, himself:
Keep in your thoughts and/or prayers a certain fifteen year old kid that has half my genetic code. He’s just been diagnosed with a leukemia relapse (he had it before as a child of seven). My life is about to get real interesting, again, but it’s not about me, it’s about the kid, and you can never have too many people pulling for you. I firmly believe that we are all connected in some mystical level to each other and to the rest of the universe. Any time one hurts, we all hurt.
I’ll likely be pretty busy for the next little while. It’s amazing how little the rest of things matter when something like this comes up. God Bless.
September 4th, 2009 at 2:27 pm
Excellent post Barry! What I find most especially fascinating is the almost complete lack of response from any of the heavy traders who regularly post here . . Where are you Leftback? Ben? Karen? Cvienne? I-man?
September 4th, 2009 at 2:28 pm
Curmudgeon – I am so sorry to hear about your son and I wish you the best. You sound like an amazing dad and I know having your support will greatly improve his outlook
September 4th, 2009 at 2:31 pm
@Curm: I’m sending positive vibes, thoughts and prayers your way. If it’s worth anything to you, my sister had maybe the worst brain tumor a person can have (was given maybe a 1% chance of living beyond a year) and 11 years later almost to the day is totally clean and living a normal life. You wouldn’t even know she went through all the trauma of a major brain surgery, several rounds of chemo and radiation (and max doses of it) if you just met her today. Hang in there.
September 4th, 2009 at 2:37 pm
I attempted two posts this thread right off the bat but was rejected/lost for some reason…
September 4th, 2009 at 3:30 pm
karen
The word, casin@, is verboten. I’m sure some other related words that are bound to come up in this thread about gambling are also in that category. That’s probably frustrated more than one poster.
September 4th, 2009 at 3:34 pm
Onlooker, well that explains everything! thank you.
September 4th, 2009 at 3:34 pm
Kent,
w/this: “The meaning(s) of many common words that shape human behavior are so fluid and abused that they border on abstract and illusion.
“Man acts as though he were the shaper and master of language, while in fact language remains the master of man.” ~ Martin Heidegger”
Nice point, and, also, Nice Threads~ BR made a good choice when he was able to hand the ball off to you; you can run.
as well–
http://legal-dictionary.thefreedictionary.com/Definition for add’l ref.
~~
Curmudgeon,
w/this: “I firmly believe that we are all connected in some mystical level to each other and to the rest of the universe. Any time one hurts, we all hurt.”
The American Transcendentalists, of which, the most renowned, RWE and HDT, would concur.
http://www.transcendentalists.com/
As, I do, too.
Accept, from this end, my best, to you, and yours. And, remember, the Mind is the best medicine we have, even, in, this, the 21stC..
September 4th, 2009 at 3:50 pm
TC, you have my positive vibes. ~~
September 4th, 2009 at 3:55 pm
tc-
that’s a heartbreaker tc- so sorry to hear- as hoffer observes- the mind is strong medicine-
stay strong
September 4th, 2009 at 4:04 pm
I used to be an investor (CFA, professional etc.), but am now a gambler. There is all the difference in the world between the two mindsets.
As an investor in a company I attempted to understand the value offered by its shares relative to other shares. I made an effort to think about how the company would evolve over time and how that would effect the initial assessment of ‘value’. In conclusion, I would buy the shares or decide not to.
As a gambler in a company I attempt to understand the likely movement of the shares due to how other people’s (gamblers and investors) perceptions of the company are likely to change. As a gambler, therefore, I might well open a long position in a company or market that as an investor I would have stayed clear of.
The main difference is the resistance on the trigger. As an investor with deep conviction on the companies I held in my portfolio I would hold a position through a loosing phase unless new evidence emerged to alter my assessment. As a gambler, if my call on sentiment was wrong and others are becoming more negative rather than more positive, I am more likely to cut a loss and sell.
All the difference in the world.
September 4th, 2009 at 4:21 pm
For TC, lo encomiendo a tu cría al Apu Chachani…
A few thoughts on gambling and investing. I am writing from Arequipa, Peru. Yesterday I returned from a quick excursion to a town called Espinar near Xstrata´s Tintaya polymetallic mine- they ship out the copper, zinc et al by truck but for the silver and gold-avión…outside of Espinar (which is at 4000 meters above sea level) there is a community called Chorrillo (at about 4500) where an NGO called Asociación Proyección with truly meager financing from Oxfam has been carrying out a project to improve the feed available to the livestock (alpacas, llamas, vacas, y borregos). The area has become extremely dry due to the disappearance of the glaciers and Tintaya´s immense use of water (enjoy your copper, guys- somebody else is paying the true cost). The project helps local pastors to grow rye grass (forraje) at an altitude which no one thought possible and to manage the area´s scarce water resources in a more efficient manner (irrigation and sprinkler- riego por aspersión). At one gentleman´s plot of about 6 hectares he has been growing rye for three years. His herd of dairy cows has doubled to 10 (this is subsistence farming), their production provides him with an income of 6 to 7 times the local average (a little less than 450 USD compared to 75 to 80 USD average). His four childern are well nourished, his wife healthy and happy (yesterday she served me a yogurt that was so good that I nearly wept) and he is teaching his neighbors how to do what he has done in cooperation with Proyección Asociación. Total cost for tubes, webbing, sprinkler heads and connections approximately 4900 USD. That is investment. Tintaya´s activity implies for more risk and greater potential losses. That is gambling. Additionally, I went to a town called Condoroma at more than 5000 meters above sea level. If any of you ever go there, don´t jog around the plaza de armas. Also, for high adventure people- go to Sukuytambo- just trust me and bring your runtus, yer gonna need them.
September 4th, 2009 at 4:52 pm
Apologies if someone already said this…
“Investing” is placing assets into something you have control over.
Everything else is “gambling.”
September 4th, 2009 at 5:18 pm
Gimme a break. What’s the effin’ diff?
Are we debating semantics or decorum? And if so, the degree is all that matters.
Or are investors those that don’t dip their elbows in the gravy or put them on the table? Yep, my gran’ told me about them fellows. She said to count yer fingers after shakin’ hands. Might be a couple missin’ afterwards. Those investors be a shifty lot she said!
Six of one and half doozen o’r the other, said me gran at least.
September 4th, 2009 at 7:38 pm
@MRegan:
Well said.
September 4th, 2009 at 8:29 pm
@thor (2:27)
I’m just getting to this thread because I was involved mostly in another one…
If you’re interested in my POV it’s this… I have nothing to add here…
Who cares whether I, or anyone else, is an investor or a gambler? I’m not much interested in knowing myself to that degree, nor do I question anyone elses motives on the subject…
And while Dan Duncan put some time into some well articulated narrative there, even his comments failed to reach any conclusion (except for, perhaps a veiled notion that unless someone hands their money over to some quant guys with their Hal 9000 trading against some other guy’s Hal 9000, they’re destined to go home broke)…
As for INVESTING… that term has little to do with money in my life… I INVEST “time” is what I invest… Time with my family, time, over my career, with students (at the gym), time on my OWN temple, time with friends…Nowadays, time on my land…and ALWAYS, ALWAYS time with my creator…
This weekend, and going forward, I also plan to invest a little time honoring TC’s request (no sweat there, my friend)…
September 4th, 2009 at 11:56 pm
That point about time is interesting cvienne.
I posted in the last thread as well, so I won’t go nuts either.
My view is that with gambling you will
-on average lose all your money, usually at 25% per bet or something.
-You will lose time.
-The long term return is only a buzz each ‘win’ (unless you win div 1 or 2 :o).
-You have given that money to the person running the gambling house.
With investing,
-the economy is zero sum and you will maybe lose money if you don’t pick on average positive sum things to invest in.
-You lose the time value of the money. To an individual, the time value of money only matters though if you want your money and you can’t get it. You will also lose time researching the world, which is not all bad.
-The return is what it is.
-You have loaned (or sometimes given) your money to a company (or another investor in some cases).
September 5th, 2009 at 12:31 am
Would the volume of ‘investing activity’ that is done in today’s market even be necessary if the purchasing power of money hadn’t declined so dramatically since 1913?
September 5th, 2009 at 4:06 am
Neither. . . i consider myself a “fighter.” Struggling tooth and nail with my back against the wall to eek out survival in a corrupt and flawed world; part of the lost generation, trying to survive and have enough to eat and maybe eventually find a way to carry on my lifeblood.
Currently, I am constantly remembering the old joke from boy scout skits on campfire nights:
Two campers are walking through the forest when they suddenly encounter a grizzly bear. The bear rears up on his hind legs and lets out a terrifying roar.
Both campers are frozen in their tracks.
The first camper stops to tie up his running shoes.
The second camper watches him and says, “It doesn’t matter what kind of shoes you’re wearing, you’re not gonna outrun that bear.”
“I don’t have to outrun the bear, I just have to outrun YOU,” he answers.
September 5th, 2009 at 6:00 pm
I am a Speculator, which I suppose is a type of Gambler. IMO any trader with a winning edge is a Speculator. A trader without a winning edge is a Gambler. The winning edge, or lack thereof, is the difference. Most of the Speculator’s returns come from appreciation in the share price rather than dividends.
An Investor puts his capital at risk by giving capital to those engaging in a productive pursuit, expecting to share in the profits of the endeavor. IMO, the highest order of Investor buys stock in the primary market and then looks f orward to receiving his share of the profits in the form of dividends, and then a return of his capital when the shares are sold.
Lately, thanks to the excesses of Wall Street and US Gov., investors and taxpayers have become the patsy at the gambler’s table which is tragic.