Can investing sometimes be just a form of gambling?

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Can investing sometimes be just a form of gambling?
By Keith Rawlinson
Volunteer Budget Counselor

In the article What does God teach about investing, we established that God does want His people to invest. The Bible does not directly address gambling, but does suggest that gambling is a bad idea and is not pleasing to God. The Bible also teaches us that trying to get rich quick is a bad idea as well. Since that is the case, it is reasonable to conclude that investing is not gambling. Now that we have established that, let's talk about why investing is not gambling and how they are different.

Investing is attempting to make a profit by using money to acquire something of value that has a good chance of being worth more in the future. In other words, investing is acquiring things of value. Gambling, on the other hand, is using money to buy a chance that we will be given more money. Do you see the difference? When investing, we are buying something of value. When gambling, we are buying nothing but a chance.

Investing

Some investments are better than others, and some have a higher chance of success than others; but a true investment has some kind of intrinsic value. The term intrinsic value simply means that the value is more or less built in. That is to say, the investment could be resold for a set amount based upon there being a recognized value.

I think a few examples of investments will be of help here:

Buying stock in a company
When you buy stock in a company, you are legally part owner of that company. Unless you hold millions, or maybe billions of shares, you own a very minuscule and insignificant part of the company, but you do own part of the company nonetheless. Therein lies the intrinsic value. The company generates sales which have a value. The company also owns equipment and assets which have value. In many cases, rights to the name of the franchise even have value. So, no matter how little of the company a stockholder actually owns, there is still an intrinsic value.

Interest-bearing account
Whether it is with a brokerage, bank or credit union, an interest-bearing account has intrinsic value. At the very least, the account is worth the money deposited in it. On top of that, it is worth the interest it earns.

Precious metals
Metals such as gold, silver, platinum, etc. have intrinsic value. These metals have industrial uses, as well as uses in making jewelry. As long as there are actual, practical uses for precious metals, there will always be someone willing to buy them at the right price. That means they have intrinsic value and, therefore, qualify as an investment.

Contracts
This one often surprises people, but a contract does have an intrinsic value. Contracts are things like offers to purchase assets, agreements to do work for pay, mortgages, delivery of commodities, rental agreements, etc. Since a contract usually represents a promise to pay money or to deliver goods or services, the contract has an intrinsic value. Simply stated, the holder of the contract will gain benefit of some kind as a result of the contract; therefore, the contract has intrinsic value.

Please note that I am NOT endorsing the above examples for investing purposes. In fact, some of these examples are very poor investments. I am simply using them to explain intrinsic value. For more information on what to invest in, and what not to, please read my Eclecticsite.com article Getting started in investing.

Gambling

Compared to investing, gambling has little or no intrinsic value. If, for example, you buy a lottery ticket, it has no intrinsic value except for the value of the paper on which it is printed, which is virtually nothing. The lottery ticket represents only a chance to win some money; it has no value otherwise. Yes, they may have sold it to you for a dollar, but that just means you were willing to pay a dollar for something of almost no value--it does not mean that the ticket is actually worth a dollar.

The other part of the definition I gave for an investment is that there is a reasonable chance of it increasing in value. A lottery ticket may only give you a one in 150 million chance of winning, and that is certainly not a reasonable chance of making a profit. Yes, the amount you could win might be huge, but the chances of actually winning it are ridiculously slim; therefore, there is definitely not a reasonable chance of that lottery ticket resulting in a profit.

The same holds true for playing poker, the roulette wheel, slot machines and many other forms of what is considered gambling--you are not buying something of value, there is not a good chance of increase in value, and there is no intrinsic value.

Conclusion

So, there is the answer: if you are buying something of value that has a reasonable chance of increasing in value over time, then it is investing. If, on the other hand, you are buying something of little intrinsic value that merely gives you a chance at making a profit, it is gambling.

Don't let the time frame fool you either. Some legitimate investments produce a profit, sometimes a huge profit, in a very short time; but that does not mean that they are gambling. If your longterm strategy is to make a big profit very quickly with a lot of relatively risky, short-term investments, then you aren't gambling, but you are violating the biblical principle that tells us to avoid trying to get rich quick.

So, simply stated, if you are trying to make a profit by buying something of intrinsic value which has a reasonable chance of increasing in value over time, then it is investing.

If you are trying to make a quick, easy or huge profit by buying something of little or no intrinsic value which gives you a relatively minuscule chance of success, then you are gambling.

For a lot more information about saving, investing, getting out of debt and building up wealth, be sure to check out the articles available on my Eclecticsite.com Financial Page. If you are interested in getting started investing in the stock market, especially if you have little or nothing to invest, please read my book Investing With Nothing: How to get started in stock market investing with no money to invest.

To get started in stock market investing,
especially if you have no money to invest,
please read my eBook Investing With Nothing.

Visit Keith's Financial Page on Facebook

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