Gambling = Speculating = Investing = Saving

[legiteum]

A debate has come up here in the forums from time to time surrounding the definitions of gambling, speculating, investing and saving.

In my view, they all exist on the same continuum, and there's often no good reason to use these terms individually: every decision about where to place your money is a "gamble", is "speculation", is an "investment", and is "saving" all at the same time.

Say you just want to "save your money". You have a "savings account". But what does that actually mean? You put US dollars into an account and those dollars sit there, potentially collecting a small amount of interest.

But the value of the US Dollar can go down, and depreciate even faster than your interest payments. Hence you are not "saving your money", but rather you are investing in USD when you do that. And your bet might pay off: all of the other investments you would have chosen instead of USD could have faired much worse.

Are you "investing" when you make this decision? What is the difference between investing and speculating? These terms are often used synonymously, but "speculating" is usually meant to mean a more risky investment.

And what is speculating, anyhow? It's your prediction of future gains--just like gambling is. Gambling is usually meant to mean a form investment where you have little or no realistic way of predicting the outcome. In other words, the proverbial "roll of the dice". But many forms of gambling often are informed. Sports betting may come from your own assessment of a team's prospects. Top poker players make millions--playing by the same rules the amateurs play by. Is what they are doing, "gambling", or is it "investing"?

My thesis here is that all four of these things are the same thing, only differing in two factors: knowledge and risk.

On one end of the spectrum you have what many would call "saving", which is putting your money in something that is very well known, has a long reputation for stability (or relative stability), and is relatively low risk. Many choose USD (for instance) for this task, but many also choose things like real estate, or bonds, or diversified investment funds, and so on.

On the other end of the spectrum you have pure gambling, e.g. a roulette wheel, dice, or some other format where you cannot possibly know anything about the outcome outside of mathematical percentages. In this case the risk is high and the knowledge is low.

In between those things you have... the real world. Most decisions about placing your money involve some amount of knowledge and some amount of risk. Everybody has different levels of knowledge of their investment, and thus one person (say an amateur poker player) may be "gambling" because they have zero knowledge of the outcome, whereas a professional player is taking a carefully calculated risk, often referred to as "investing".

Hence all investing exists in a continuum that depends on the investor's context.

It's not correct to deride some investments as "gambling" without that context, nor is or correct to overestimate other investments by calling them "saving" just because you happen to assess the risk as lower. And it's also not correct, unless you are God, to pass judgement on somebody else's investment decision, e.g. "that's pure gambling!" or "you should invest your money in something completely absolutely endlessly safe like USD" without knowing... what they know.

Buying Bitcoin is gambling, speculating, investing or saving, depending on your own context. If you know the market very well, pay attention to it every day, and know the risks, then you could call it "investing". Some are convinced that Bitcoin is so safe that they call it "saving". Many don't know anything at all about Bitcoin except for the name, "Bitcoin" and the fact that it has gone up in recent years--in this case you would probably call their buying of Bitcoin, "speculating".

Buying USD should be treated the same way: it is a relatively safe, low risk, negative yield investment,  but how many people understand macroeconomics well enough to understand what they are doing? Even for US dollars, there is a tinge of speculation for most people.

Is buying memecoins speculation? Gambling? Investment? Saving? It depends on your knowledge, and on the risk. Clearly this realm of investment contains a higher degree of risk than others, but the actual risk will depend greatly on the knowledge of the buyer.

The list of examples is endless: all investments--every potential place you can store your money--can be gambling, or a speculation, or an investment, or savings. The difference is only in degrees.

[WillyAp]

There exist platforms where you can save up and get a higher return than the inflation.
Parts of the inflation is also part of you control on expenses,
Once you have saved more than you can invest, You can finance something together with others and get a healthier return.
You do this for 20 years you have made it.

No lambos in that equation.

[memehunter]

While gambling will always be -EV (negative expected value), on the other hand, the market will always be +EV (positive expected value) in the long term because the market is essential for survival. The market is supported by the forces of evolution and will always grow in the long term. While both involve risk, their long-term trajectories and underlying purposes are fundamentally different.

[legiteum]

While gambling will always be -EV (negative expected value), on the other hand, the market will always be +EV (positive expected value) in the long term because the market is essential for survival. The market is supported by the forces of evolution and will always grow in the long term. While both involve risk, their long-term trajectories and underlying purposes are fundamentally different.

But both of these calculations depend on an (unknown) time period. In other words, you can always say, "in the long run..." but you never know how long. If the period is 50 years, with 49 years of losses and the last year being the whole gain then... you'll be dead by the time you collect your profits.

And while I would tend to agree that the overall US equities market (which is what I assume you mean here by "the market") will almost undoubted grow over the long run as the US and world economy grows, again, you don't know the time period, so you cannot invest based on that information alone. You could potentially invest in thousands of individual instruments which will all individually go down, even as the aggregate of all instruments goes up. And you cannot know, a priori, which investments are which.

Gambling has the same problem here when you talk about it abstractly: the aggregate of all bets through (say) professional betting sites will always be negative since that's the business they are in, but you cannot know ahead of time about individual bets, which is what you pick.

Hence I'm still not seeing a good reason to treat these concepts differently: they all involve a calculated risk, with varied degrees of knowables and unknowables.

[XZERO1]

Say you just want to "save your money". You have a "savings account". But what does that actually mean? You put US dollars into an account and those dollars sit there, potentially collecting a small amount of interest.

But the value of the US Dollar can go down, and depreciate even faster than your interest payments. Hence you are not "saving your money", but rather you are investing in USD when you do that. And your bet might pay off: all of the other investments you would have chosen instead of USD could have faired much worse.

Gambling and investing/trading could be seen as the same thing and you are not wrong there, however saving can be quite different and carry out different/better results, I mean of course you should not put all your money as USD or other national currencies and let it sit in your bank account despite whatever interest they are paying you, "the house always wins" is also true for banks, they are making more interest from your money than the number that are paying you.

A mixture of different digital and physical assets always makes for a better/less riskier investment over all, like buying some lands, maybe tech stocks that you like their products and you are optimistic that they will appreciate in value mid/long term, some physical gold or digital gold funds, and fully digital assets like Bitcoin/Ethereum.

This way you are practically making sure you minimized your risk and exposure to heavy drops in value to the minimum while not missing out on too much potential profit with going with some low risk/low return investment like just Gold for instance.

[memehunter]

^

You are right; we all are dead in the long term . My argument for the market is based on the bell curve for large enough samples. You will surely get profit from being invested in the market as time passes, but you will lose in gambling with time (Math). This is the same analogy you used for a poker player who is using GTO and others who do not. You can beat him in the short term, but if you play enough hands, math will be acting against you. The same goes for the market.

[WillyAp]

Gambling and investing/trading could be seen as the same thing.

Nope gambling is a chance game, in investing you can get your money back if you invest wisely. And trading is selling more expensive than you bought your product. Trading on a stock exchange is a kind of bet. But still not the same as gambling.

https://www.investopedia.com/articles/basics/09/compare-investing-gambling.asp

[legiteum]

Gambling and investing/trading could be seen as the same thing.

Nope gambling is a chance game, in investing you can get your money back if you invest wisely. And trading is selling more expensive than you bought your product. Trading on a stock exchange is a kind of bet. But still not the same as gambling.

Well, there are some forms of gaming that aren't pure chance even though they are based heavily on that e.g. Texas Holdem Poker--there are people who make their living on playing, so they are clearly not "gambling" in the usual sense of the word.

And when people "invest" in something with virtually no knowledge of the investment other than it's name, that is basically the same thing as gambling. There are clearly huge differences between different kinds of investments, but they all exist on the same continuum, is what I am saying...

[WillyAp]

Well, there are some forms of gaming that aren't pure chance even though they are based heavily on that e.g. Texas Holdem Poker--there are people who make their living on playing, so they are clearly not "gambling" in the usual sense of the word.

Yes, there are forms which are similar but that does not make gambling equal to trading.
 
The trading volumes leave little to chance. The millions of luckless players trying to get rich fill the pockets of Blackrock. And there is an exception to that rule too. Just remember Gamestop.
https://www.cnbc.com/2021/01/27/gamestop-mania-explained-how-the-reddit-retail-trading-crowd-ran-over-wall-street-pros.html

As a side note its most unfortunate that to become a Retail investor has high hurdles, form a LLC with the capability to open a bank account in the US, plus funding it. 

[legiteum]

Yes, there are forms which are similar but that does not make gambling equal to trading.
 
The trading volumes leave little to chance. The millions of luckless players trying to get rich fill the pockets of Blackrock. And there is an exception to that rule too. Just remember Gamestop.
https://www.cnbc.com/2021/01/27/gamestop-mania-explained-how-the-reddit-retail-trading-crowd-ran-over-wall-street-pros.html

As a side note its most unfortunate that to become a Retail investor has high hurdles, form a LLC with the capability to open a bank account in the US, plus funding it. 

Good example: Gamestop was different than investing in a speculative memecoin... how exactly?

[WillyAp]

Good example: Gamestop was different than investing in a speculative memecoin... how exactly?

In Gamestop a group of trading fans got together and agreed to follow a strategy.
Bundled forced have more impact and have influence on the shares price. A tactic used by the likes of Blackrock and co.