Is there a hard threshold? Do high risk investments such as penny stocks qualify as gambling? Do low risk investments? Annuities? Bonds? CDs?
This comment got me wondering.
Is it more to do with the venue? Stock markets and real estate vs casinos and the lottery?
Were the MIT Blackjack Team gambling or investing?
Is this just another semantic hotdogs are sandwiches discussion or is there an agreed threshold?
Any time you spend money on the chance to make money, it’s gambling, IMO.
Lottery ticket? Gambling. Buying stock? Gambling. Sports betting? Buying into a poker game? Believe it or not, gambling (which is the only gambling I’ll personally do since the game is still enjoyable even if I lose).
Spreading out stock purchases across the market guarantees returns over the long run.
Buying one stock is gambling, buying a wide spread of stocks (or an index fund that does so) and holding them for years is investing.
I agree in principle, but technically it’s really just very low risk.
Buying into a total market index fund at 90yo could be considered high risk since it’s not unlikely for the market to go down with no time for you to recover.
But does that make it gambling?
The key phrase is ‘over the long run’ and ‘holding them for years’. That 90yo wants to have long-ago moved their investments into bonds because, as you point out, a stock market downturn may not come back up before they die. Waiting out a downturn takes years and they are drawing down on their investments regularly.
Lol.
Buying one lottery ticket is gambling. Buying 1,000 different lottery tickets is investing. Got it.
Buying enough lottery tickets to guarantee a payout just ensures you lose money as the house always takes a cut. Investing, unlike the lottery, has the benefit of not being a zero sum game. There is wealth generated and buying something like an index fund and holding for years puts you in the group making a profit along with everyone else.
Example: If you bought VTI (an index fund) just before the 2008 crash (and subsequently lost a bunch of value during the crash), you would still be up 257% today. And that isn’t some outladish example; do the same with the S&P 500 and you are up 279% today. Purchasing for the long term and with a wide array of stocks is investing.
Edit: And in both of those examples you would be earning dividends the entire time as well, which is not part of the quoted %.
It’s technically not a guarantee, it is certainly possible for the entire market to take a dump at once. Over the long term – decades – it has been profitable to invest in the US stock market even counting these downturns. Like they say in all the stock prospectuses, though, past performance is not a guarantee of future results.
Still, I’ll take my chances with the market. At least if it goes to zero, I’ll have a lot of company at the homeless shelter.