Whenever we talk about investing in mutual funds, the very first advice that we get from our elders is, “investing in a mutual fund is similar to gambling, don’t invest you will lose all your money!”. Here the question arises, do really investing and gambling have the same meaning?
Well, if you refer to dictionary, there, investing is defined as putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit, whereas gambling refers to playing at any game of chance for money or other stakes, simply betting, that we call in Hindi as “Sattebazi”.
Gambling is a result of emotions while investing in mutual funds is a well-researched process. There are many basic differences between gambling and investing, some of which we are going to discuss, read to know them.
Investing Is Research-Based, While Gambling Is Luck-Based.
When people plan to invest, they go through value-search of different funds, they find out every detail related to these funds, do compare the funds and then pick out the best fund, for their investment. Also, they hire fund managers to carry out their investment with smart strategies, in order to earn good benefits. On the other hand, in gambling, one doesn’t require much research, as it is a completely emotion-based deal, and its result depend on luck if you are lucky its good for you if you luck is not with you, it’s the worst for you. Basically, there is a thin line between the two, but they are not the same.
Investing Gives Ownership of An Asset Gambling Doesn’t.
When people invest in mutual funds, they purchase units of assets, that is the units purchased by them belong to them, and they are the owners of these units, thus there are two instances possible, either you receive a low benefit or high benefit. In gambling when you put money, here also two instances are possible, either you receive more money or you receive no money, thus there is no ownership in the assets that come at the end of the gambling.
Investing Is A Long-Term Game, And Gambling Is A Short-Term.
Investment in mutual funds and especially in Equity funds is a long-run game, that gives its best benefit in long-term, the only exceptions are the debt funds and its subcategories like liquid funds, short-term funds and more that are short-term investments. Gambling or trading is done during trading hours, and sometimes it can extend to a couple of weeks or months but nothing more.
Investing Is Less Risky Than Gambling
Investors who invest in mutual funds have always an option to switch their investment from one fund to another if their fund is underperforming continuously, whereas gambling is based on the principle of going all in. In gambling either the person they get surplus benefits, or they lose everything and do remember, money lost in gambling or trading never returns back. Also, while investing in mutual funds, an investor can withdraw their investment any time when they need it. Do remember, in mutual funds, investors face a loss, but never lose all their money.
Investing Is Planned to Reach A Goal, Gambling Isn’t.
People when they plan to invest in a mutual fund, primarily they fix an investment goal, like retirement planning, child’s education, child’s marriage and more, then plan their investment accordingly in order to accumulate wealth for their goal, while gambling is done to earn money and sometimes for the pleasure. Planning your goals through gambling can be dangerous, as it is risky and will work only when your luck favors you.
Investing Isn’t Addictive, Gambling Is
Investment is completely people’s choice if they desire to save for their future investment, or if they don’t, they don’t invest. A study says that gambling is a serious mental condition, and some organizations are there that identify people who are addicted to gambling and help them deal with their problems and recover from the same.
The above-discussed points illustrate the differences between gambling and investing. If you look very closely at these differences, you will find that there is a very fine line difference between gambling and investing. Gambling is riskier than investing, and gamblers are high-risk takers, while investors' risk tolerance levels are slightly lower. Gambling completely depends on luck and investing depends on patience, practice, and knowledge. So basically, it’s a bad idea to drop out the idea of investing in mutual funds, by considering it similar to gambling. Hope till, you must have understood the differences, if you have, then plan your investment in mutual funds, and secure your goals.
Most importantly, always consult a financial planner or advisor, before starting your investments. They will help you select the best fund, for your investments as per your requirement.
You can also contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).