When it comes to money, we just want ways to multiply it. While we can choose to invest our money to make it smartly grow, but whilst driving growth - the key is to understand the difference between investing, gambling and growing your money.
Therefore through the article we intend to focus on the difference between, these three aspects and why you should focus on investing your money, rather than gambling or speculating it away.
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The ultimate goal of investing, gambling and speculation is making more money and that too without losing any principal amount.
The risk involved in investment in financial instruments can be controlled as compared to gambling or speculating. This can be achieved by diversifying your portfolio by investing in different instruments like equities or mutual funds and in turn mitigating your losses.
In case of gambling, you either win or you lose. There is no way to prevent losses but you can certainly minimize it. The only way to do so is by sticking to a limited fund and not exceed your capital in the heat of the moment at any cost.
Speculation has higher risk than investing but lesser risk as compared to gambling. When speculating, the speculator is aware of the fact that the more risk he takes, the higher his potential gains will be and the higher the chances of him losing money.
The time factor plays an important role in money matters. In order to gain more, you need to consider the time you have to allocate for your money to gain pace.
Investing money in financial products is quite stable with reasonable returns over a longer period of time, and certainly more probability to earn profits. Hence while investing allotment of appropriate time horizon for the money to grow and mature is very essential.
With a small probability of winning, gambling is a time bound activity with no stability. The returns solely depend upon one’s luck and odds. Within minutes you might turn broke or become rich.
Speculation has uncertain growth. It may grant higher returns provided the speculators do not opt for a long period. It involves higher risks however with the right time horizon, one may be able to achieve good returns.
The money that you are using should be backed by a good set of knowledge. Handling money is tough and important task.
Investing is usually preferred more by cautious and conservative investors who analyse the fundamentals of the underlying asset and company.
Gambling is an art of randomness. It involves a number of permutation and combinations and usually opted by investors who are ready to lose original investment and are simply looking to have fun.
A speculation on the other hand requires a lot of background check. The decision is usually based on news, past-present performance and market sentiments. Speculators are usually aggressive and high risk takers.
In conclusion, all investors are advised to choose the method that best suits their risk appetite and in which they are comfortable the most. In investing knowledge and proper analysis increases chances for creation of wealth while in speculation the timing drives the boat and in gambling luck is a force to be reckoned with.