Why Investing is Not Gambling

Why Investing is Not Gambling

By Mike Sunderland, CFEI®, Wealth Advisor

  “The plans of the diligent lead surely to abundance,
    but everyone who is hasty comes only to poverty.” (Proverbs 21:5, ESV)

Risk

Everything we do in life involves some degree of risk. Driving a car, owning a home, starting a business, or even eating food requires a willingness to take on the risks associated with these activities. Some activities are riskier than others, but risk alone is not a determining factor in whether an activity is an investment or a gamble. While the degree of risk compared to the return might send an activity over the line into speculation, the primary difference between investing and gambling lies in the product of the activity and the motivation for engaging in it.

What is Gambling?

Gambling, as most people understand the term, is dishonest gain because it produces no value to society and no product apart from entertainment. The financial motivations for gambling are often to get rich quickly without producing anything for a return. Gambling is simply the exchange of money from one hand to another, often including the use of deception and the winner taking advantage of the loser with a negative expected value. Negative expected value means that over time, the likelihood of loss exceeds the potential return. The only justifiable benefit of gambling is someone’s willingness to pay for the entertainment involved in playing a game.

What is Investing?

Investing, in principle, is entirely different. An investment provides capital for a business, organization, or individual to produce a good or service for the benefit of those who would use their product. If the business or organization is successful, it returns the capital to the investor with interest, thus producing not only an increase of money to the investor but an increase of benefit to the user of its production and/or society itself. No doubt, investing involves risk. If the business or organization uses an investor’s capital poorly or the product they produce is simply not in great demand, then the investor will lose money. At the very least, the investment was an attempt to produce a good or service for the benefit of society.

Some investments that almost everyone would consider to be good for society are start-up companies and education. Starting a business is extremely risky considering the probability of failure within five years, but nobody would call starting a business gambling unless the nature of said business was a casino or an attempt to create an obviously useless product. Likewise, education has become a costly endeavor, but it is a necessary investment for anyone seeking a career in a field that requires specialized skills.

Anything can be a Gamble or an Investment

To be clear, gambling can be involved within the structure of investing. No matter what the activity, there will be people who attempt to deceive and manipulate the ignorance of others for personal financial gain. Anyone who is entering into an activity without understanding of what they are doing could be gambling, whether it is a business venture, education, real estate, or the stock market. Paying a high price for an education in a field with low demand or low pay could also be considering gambling if the student is taking advantage of someone else’s generosity with little potential return.

What the Bible Says

If you look for the word “gamble” in the Bible, you will not find it. See for yourself! You will find instructions on work, honest and dishonest gain, counting the cost, saving for the future, and investing. Mostly, you will find that the Bible addresses the heart and motivation of its readers. The Bible clearly calls people to plan diligently for the future, seek a good return on investments of many kinds, and to be honest in our dealings.

Actually, the Bible calls upon all people to take the greatest risk of all; to place our personal hope and security in Jesus Christ.  He is the Son of God who became a man, lived a perfect life, died as a substitute for our sins, rose from the dead, ascended into heaven, and will come again to judge the world. There is an abundance of evidence to support all of this, but at the end of the day, the Bible calls every person to count the cost of surrender to Christ and to trust in Him by faith for forgiveness and eternal life. If Jesus is still dead, then faith in Him is a foolish gamble. If Jesus is alive, then faith in Him is the greatest investment anyone can make!

 

Financial Planning & Investment Advisory services offered through Beacon Wealth Consultants, Inc.