Gambling and investment share a similarity in that they ‘spend money to make money’.

However, did you know that there are clear differences between gambling and investing in terms of structure and objectives?

This article explains the differences between gambling and investing in detail, touching on the risks and returns of each.

If you want to increase the amount of money you have on hand or are interested in gambling or investing, please refer to this article.

What is the difference between gambling and investing?

First, we explain the difference between gambling and investing.

Gambling is the pursuit of profit based on chance, while investment is characterized by systematic asset management.

In addition, they share the need for good judgment and risk management when investing money.

Gambling is the pursuit of profit based on chance

Gambling is the pursuit of profit based on chance.

Gambling is also an activity with a high degree of uncertainty regarding returns, as money is made through the accumulation of luck and chance.

In some cases, predictions are made for horse and boat races and boat races in public gambling, based on the condition of the horse and boat motors, but predictions do not always lead to results.

Since accidents such as horses falling from their horses or boats capsizing are common during races, they are also heavily influenced by luck factors.

Furthermore, pachinko and casinos have very few decision-making factors like horse racing and boat racing, which makes it difficult to predict winners and losers.

In particular, pachinko is a strong form of gambling, as it is completely stochastic and therefore completely governed by the luck factor, except for the placement of the nails.

Investment is a planned asset management mechanism

On the other hand, investment is the act of managing assets in a planned manner.

Investment refers to the act of investing money in shares or products of companies that have good prospects for future growth.

The mechanism of investment differs from gambling, which has a strong element of luck, because it is necessary to select companies and products with prospects for corporate growth and development.

It is also a form of planned asset management, as it requires attention over time to whether the invested company or product will grow or not from a medium- to long-term perspective.

Why gambling and investment are often confused

One of the reasons why gambling and investment are often confused is that the process of ‘spending money and expecting to profit’ is the same.

As mentioned above, although gambling and investment differ in terms of the mechanics, they both have in common the act of putting one’s own money or assets at stake, with the possibility of increasing one’s money.

Therefore, it is a fact that many people consider investment to be gambling.

In addition, gambling and investing both carry the risk of losing money and require good judgment and information-gathering skills to decide what to spend money on and when.

The fact that they both carry various risks and similarities means that gambling and investment are often confused.

Differences between gambling and investment risks

The following section describes the differences between the risks of gambling and investment.

Gambling involves the possibility of losing everything in an instant, while investment involves risks with long-term returns that are difficult to predict.

Before starting to gamble or invest, it is important to understand the risks of each in advance.

Gambling risk: the possibility of losing everything in an instant.

The risk of gambling is that you can lose everything in an instant.

This is particularly true of public gambling such as horse and boat racing and casino games.

Horse and boat races and casino games such as baccarat and roulette allow players to bet large sums of money on a single race or game.

Therefore, while you can expect to get rich if your prediction is right, you can lose millions or tens of millions of yen in an instant if you are wrong.

It is important to understand that gambling is a high-risk, high-return activity, depending on the type.

Investment risks: diversification and long-term returns

The risk of investing is that economic conditions and returns are difficult to predict.

Investments are affected by domestic inflation and the global financial crisis, not to mention the business situation of the companies operated by the shares.

While it is easy to gather information on a company’s vision and future prospects, large-scale financial conditions, domestic or global, can be difficult to predict.

In addition, as there is no guarantee of the money invested, known as the principal, there is a risk of loss of principal, which means a negative return on the principal if the investment is made over the medium to long term.

Therefore, in some cases, diversified investments are used to avoid the risk of loss of principal.

Diversified investment is a method of investing your money not in one company, but in a number of companies that you have identified.

Diversification means that even if one company goes under, if the other company shows rapid growth, the loss will not be too large.

Although investment is an act of anticipating returns over the medium to long term, it involves risks that are difficult to predict in the future and, therefore, requires risk management through diversification.

Differences between gambling and investment returns

The most significant difference between gambling and investment is the expected return.

Expected value is an indicator of how much return can be expected on the amount invested.

Gambling is structured on the assumption that you will lose, whereas investment is characterised by the expectation of long-term returns.

Expected value of gambling: structure based on the assumption of losing.

Gambling is an activity that is structured on the assumption that the player will lose.

It is, therefore, necessary to understand that the expected value of gambling is negative from the outset.

Public gambling is operated by national and local authorities, while casinos and pachinko are operated by specific companies.

The operator spends money on equipment, electricity and personnel costs to maintain an environment in which gambling can take place.

To cover the operational costs of gambling, the operator must also make a positive profit, so it must recover a certain amount of the money spent by players.

Therefore, the operator does not make a return greater than the amount recovered, so when gambling is looked at in total, it can be seen that the structure is based on the assumption that the player loses.

Expected return on investment: long-term growth potential

On the other hand, investments, unlike gambling, offer the potential for the long-term growth of a company.

Investment is the act of putting money into a specific company or product of one’s own choosing, and there is no operator of the investment itself.

Therefore, investment is not structured on a negative basis, as it does not require the recovery of operating and personnel costs as in gambling.

With investment, there is a possibility that the value of the company or product in which the investment is made will continue to increase in the future, so returns can be expected from a long-term perspective while watching the money move.

Differences between gambling and investment objectives

The next section explains the difference between the objectives of gambling and investment.

Gambling aims for short-term excitement and the pursuit of immediate profit, whereas investment aims for long-term asset-building and stable returns.

Purpose of gambling: short-term excitement and pursuit of immediate profit

The main objectives of gambling are short-term excitement and the pursuit of immediate profit.

The main feature of gambling is that the results of both are immediately visible.

In pachinko and slots, the day’s earnings are clear after a few hours or at most a day’s play.

In horse and boat racing, the odds are fixed at the end of each race, so you know on the spot whether you have won or lost a horse or boat ticket.

The immediate knowledge of the outcome excites the brain and gives pleasure, while the joy of winning money on the same day is a feature of gambling.

In the majority of cases, those who enjoy gambling are likely to be spending money for short-term excitement and the pursuit of immediate profit.

Investment objectives: long-term asset building and stable returns

On the other hand, investment aims at long-term asset building and stable returns.

Investments, which are directly influenced by the future trends of companies and products, basically require a long-term perspective in order to ascertain changes in the value of the investments.

As it is also an act of steadily increasing assets, it tends to be used in anticipation of situations where money will be needed in the future, such as to fund children’s education or to build assets for retirement.

Investments can also be expected to provide a stable return overall, as the value of the investment fluctuates.

Some investments, such as NISA and iDeCo, are recommended by the state, so if the aim is long-term asset building, the returns you can expect will be greater if you start at a young age.

However, as money is not immediately available, it is not suitable for those who want instant cash, as is the case with gambling.

Differences in time frames between gambling and investment

Gambling and investment have different timescales for returns.

Gambling is a system where the outcome is determined in an instant, whereas investment is a system where you expect long-term returns over years or decades.

The immediacy of gambling: the outcome is determined in an instant.

A key feature of gambling is its immediacy: the outcome is determined in an instant.

In pachinko and slots, the day’s earnings are revealed after a few hours or at most a day’s play.

In horse and boat racing, the odds are determined after each race, and the results of the horse or boat tickets purchased are immediately known.

While there is the potential to win large sums of money in an instant, the risk of losing large sums of money in an instant is the most important feature of gambling.

Long-term nature of investment: returns over several years to decades

Investments are expected to provide returns over a long-term perspective of several years to decades.

As investments aim to increase assets over time, the structure is very different from gambling, which offers immediate results.

For example, in equity investment, you buy shares in a company based on your prediction of the company’s value and future growth potential, and aim for a positive return by holding shares over the long term.

If you buy shares in a company based on an accurate prediction of the company’s future growth, you can expect a large increase in the share price over a long period of time, from a few years to several decades.

It does not have the immediacy of gambling, but over time, if the company’s performance improves, you may be able to increase your profits significantly.

Differences between gambling and investment from a psychological perspective

Gambling and investment have different psychological aspects.

As the term ‘gambling addiction’ suggests, gambling involves the risk of falling into addiction due to the desire to ‘win more money’ or ‘win back what you lost’.

On the other hand, in investment, there is an added risk of losing control of emotions due to fluctuations in share prices, which can lead to an inability to make rational investment decisions.

Risks and causes of gambling addiction

Gambling is an activity that carries a high risk of developing a gambling addiction.

Gambling addiction is a condition in which a person loses control of his or her desire to gamble and this interferes with daily life.

Symptoms of gambling addiction include

  • Thinking about gambling all the time.
  • Feeling restless when away from gambling
  • Wanting to stop gambling but not being able to
  • Starts to stop socialising in order to gamble
  • Gambles more often
  • Spend more money on gambling
  • Gets into debt to pay for gambling

The causes of gambling addiction are varied, but in many cases it is due to experiencing a big win or having an environment that is conducive to gambling.

It is also thought that people with low self-esteem and those who are easily stressed are more likely to become addicted to gambling.

In particular, those who gamble as a means of relieving stress are at risk of developing a habit of gambling because they cannot forget the temporary pleasure and satisfaction they gain.

Investor psychology: the importance of planning without being influenced by emotions

It is of utmost importance that investments are planned and not influenced by emotions.

Investments are subject to losses at certain times due to fluctuations in the price of the shares held.

Some people try to recover the negative amount when losses occur, but it is not recommended to invest money based on temporary emotions.

Investing is not gambling; it is necessary to predict returns from a medium- to long-term perspective.

Therefore, it is important to note that in some cases, trying to recover lost money, as in gambling, can lead to further losses.

As losses increase, so does psychological anxiety, and there is a risk of being unable to make calm investment decisions.

There is a risk of making investment decisions based solely on short-term results, such as ‘the share price keeps falling, so I should sell’ or ‘the share price keeps going up, so I must buy’.

In investment, it is important to trade calmly and not to be affected by temporary drops or fluctuations in the price of a share.

Legal differences: regulation and supervisory bodies for gambling and investment

There are also differences between gambling and investing in terms of legislation and supervisory bodies.

Gambling includes public gambling, which is operated by national and local authorities, and casinos, which operate legally or illegally.

Investments, on the other hand, are recommended by the Financial Services Authority and are traded on stock exchanges, the market for shares.

Legal framework for gambling: public gambling and legal and illegal casinos

Gambling includes public gambling, legal casinos and illegal casinos.

Public gambling refers to gambling operated by the national or local government and includes horse racing, boat racing, bicycle racing and auto racing.

Public gambling is legal because it is all operated in accordance with the law.

Horse racing is governed by the Horse Racing Law, boat racing by the Motor Boat Racing Law, bicycle racing by the Bicycle Racing Law and auto racing by the Small Bicycle Racing Law.

On the other hand, casinos in Japan are regarded as illegal gambling.

If you want to use a recommended online casino, use in-game currency called bonuses or play a trial version without spending real money.

Legal framework for investment: supervision by the FSA and stock exchange

The FSA and stock exchanges are involved in investment.

The FSA recommends that investors invest with firms that are registered with the FSA.

In addition, the stock exchange, which is the market, is essential for stock investment because you are buying shares in companies.

The money invested in shares is the capital of the company and the value of the shares fluctuates according to the company’s sales and performance.

Companies do not have to return the money collected from shareholders, but shareholders can make a profit by selling their shares.

The place where shares are bought and sold is the stock exchange.

The stock exchange is where investors who want to buy and sell shares trade.

Investors can be located both domestically and internationally, so the stock exchange allows trading in shares from all over the world.