Why is investing not seen as the same way as it is gambling?
In: Economics
The difference is the probability of recovering your money. Gambling on slot machines or card games has the odds heavily stacked against you. The probability of winning anything is quite low (less than 1%), but winning gives you many many times what you put in (100-10,000 times what you put in)
Investing in equities (the stocks that go up and down in relation to how well the company is doing) is also quite risky (and there’s no way to calculate the probability of making a profit), but the payouts can be quite significant (2-10 times what you put in).
Investing in bonds s quite low-risk but the payout is also relatively small. Bonds give guaranteed return in the form of a fixed percentage called a “coupon” paid to you every year or twice a year. Then you get all your money back when the bond reaches “maturity” in a few years. Typical coupon is 2-10% per year, so for every $100 invested you’ll make $2-$10 per year and then get to keep your $100 when the bond reaches maturity date. The only way you lose your money is if the company issuing the bonds goes bankrupt by maturity date.
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