How many times have you heard someone compare betting on sports to investing in stock and other financial markets? Betting and investing certainly both involve choice, risk, and reward – specifically putting your money on the line in the hope of future profits. However, gambling is normally a short-lived activity, while financial investments can last a lifetime.
So, can sports betting be considered as investments? Here’s a preview of the financial side of betting to help you make a clear distinction between gambling activities and investing.
What is investing?
Investing refers to committing funds or allocating capital to an asset like stocks or bonds hoping to generate income or profit. The main reason for investing is the expectation of returns in the form of price appreciation or income. That involves risk and return. However, the risks and returns expectations can vary within the same financial asset class.
What is betting?
Betting is the act of staking funds in a contingency. It means risking your money on an event or game that has uncertain outcomes and involves an element of chance. But like investors, bettors must carefully consider the amount of money they are willing to risk for a predetermined reward based on the odds.
Most professional bettors are proficient at risk management, but that doesn’t guarantee wins. Successful sports bettors need to research the team or player, manage their bankroll, and develop strategies that nudge the odds in their favor. However, sports betting platforms offer new customers lucrative bonuses and players can use platforms like CheekyPunter for comparing bookies’ free bets.
Key differences between betting and investing
A key principle in betting and investing is minimizing the risk and maximizing returns. However, the house always has a mathematical advantage over its players and it increases the longer they place wagers. This inbuilt house edge has popularized the phrase “the house always wins” in the gambling market.
Comparatively, financial investments constantly appreciate in the long run. But that doesn’t mean that financial investors will always make a positive return and also doesn’t mean that bettors can’t hit the jackpot. It simply means that the odds will eventually turn in your favor as a long-term investor unlike being a gambler.
Another key difference between betting and investing is how you mitigate your losses. If you budget $100 weekly on the NBA and fail to win all your bets, you will be out of capital. There aren’t any loss-mitigation strategies in pure gambling activities, although some online sportsbooks allow players to cash out parlays and place in-play bets.
In contrast, investors have plenty of options to avoid a total loss of the capital committed. You can set stop losses to mitigate undue losses. For example, if your stock price declines by 10% below the buying price, you can sell to another investor and retain 90% of your capital.
Why do people bet instead of investing?
Betting and investing are similar in that you risk your capital for the potential of a return or profit. However, people often choose to place bets since it requires a small amount of money upfront and causes an adrenaline rush that adds to the thrill. Additionally, betting has an element of luck and doesn’t require much guesswork or sophisticated strategies that may take years to master.
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