Understanding investment approaches: DIY, DIWM, and DIFM explained
Introduction In today’s digital age, investment platforms have become a cornersto...
Why investing and gambling are different
Some might think that a night at the poker tables is the same as building wealth through investments, but investing and gambling are very different. This little video explains why.
Transcript
Why investing and gambling are different?
Some might think that a night at the poker tables is the same as building. Wealth through investments but investing and gambling could not be more different.
If you’re looking to build your wealth you’re much more likely to succeed by investing your money than by putting a big bet on black risk exposure. One thing is clear. When you enter a casino the odds are not stacked in your favour
In every game that you play you’ll find that the house has the superior odds against the players. They always make more money than the people walking through their doors, even if some individuals do win big
Investing in contrast, tends to be a more effective way to put your money to work. The most important part here is the control investors have in where their money goes and grows instead of placing all your money into one game investing allows you to build a
diversified portfolio that helps to balance your risk and protect you against market shocks.
This means that not all of your eggs are in one basket if one investment goes down it doesn’t mean that all others will be doing so too. The more diverse your investment holdings, the more the risks are minimised.
Investing beats casinos winning big. In casinos it is as unlikely as winning the lottery. The chances of winning the national lottery stand over 1 in 45 million.
Gambling is all about making a quick win.
On the other hand, investors build their wealth over a longer period of time. It is in this way that investors aim to achieve their goals by setting risk exposure and a long-term goal. Investors can tailor their approach to help them reach their financial goals at a future period in time compounding returns versus quick wins.
Investing also offers the benefit of what has often been referred to as the eighth wonder of the world. Compounding, if you invest 200 pounds a month into a diversified portfolio for 30 years and that portfolio returns an average of 5% interest per year, you’ll end up with a massive £164,000.
In contrast, going to a casino will only give you one quick win every now and then enough for a short-term thrill but definitely not enough to contribute to your long-term financial goals.
