Duelling Fools: Is Investing Gambling?

Stuart Watson

By

Stuart Watson

Published in Investing on 18 February 2010

Two Fools debate whether investing is gambling or something more elegant.

After an unreasonably long Christmas break that is the envy of many a Premiership football manager, Duelling Fools is back.

To kick off the 2010 duelling season, we're looking at whether investing is gambling or not.

 

Last year's Duel

Last time, we asked should you use a watchlist when picking shares. It was an overwhelming victory for watchlist fans with 78% of the vote.

In a couple of weeks, we'll be publishing our next duel on Anthony Bolton's new Fidelity China fund. Keep your eyes peeled.

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Comments

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Terrapin1 18 Feb 2010 , 3:54pm

Silly argument really- the question should be
"Is gambling investing?" To which the answer is clearly "NO"
A gambler's odds are determined by the house which already has an 'edge' so that over time you cannot beat the house. The house is the investor and the gambler the deluded fool.
Thus owning a betting shop is likely to be a good business, as most gamblers lose.

4spiel 19 Feb 2010 , 1:54pm

The best answer you will find on the HMRC website. You should look in the Capital Gains Tax section into the Manuals where you will find that they are sympathetic to the view that Share Dealing is gambling. They also say it is very difficult for a private person dealing in shares to be classed as a trader.There are quite a lot of aspects to your dealing that they describe as 'badges' that altogether give them an overall 'impression'about you. In particular whether you hedge your deals is one that a professional trader would often do is an indication youare a professional trader. But there are other things -if ypou only started after age 65 it might simply be a retrement pastime. But if you are ever classed as a trader you cannot be a 'gambler ' and you lose your annual capital gains tax free allowance of around £10,000.

Basia02 19 Feb 2010 , 2:11pm

This debate has gone on for years. One comparison highlighted this week is that an investment over time will pay a return. Gambling may or may not. You are more likely to loose your 'stake' as well when gambling. This really is a useless question. Compare it with 'is crossing the road gambling?' 'Is getting in a car/plane/train gambling?'. Investing is not Gambling in the way we normally use the term, but an informed low level risk - that is why it is called investing. The odds are high you will make money.

foolishsceptic 19 Feb 2010 , 2:41pm

Surely the question should be 'Is taking the advice of the fool a form of gambling?' In true gambling if you win, you win and get your money back plus some, if you lose you get no money back. If investing you usually get some money back unless you invested in certain basket cases such as Northern Rock, Bradford & Bingley etc. If you invest when there is a bubble (such at .com or maybe certain stages of the housing market ) then when the bubble bursts (as they all do) then you could lose your shirt if your gearing is wrong! If there was a formula for getting it right all the time then we'd all win at roulette and we'd all be millionaires by investing in the stock market. All down to risk involved in the 'investment' and if you can afford to take it (win or lose).

gersuk 19 Feb 2010 , 3:35pm

Terrapin1, sometimes the house makes errors with their odds. When they do, you take advantage. All of my online accounts have been closed down and I am restricted on the high street. As someone who has had his fingers on the stock market, I would rather stick to what I know. Both are forms of gambling in my opinion. "Horses for Courses" as they say.

supersol42 19 Feb 2010 , 4:28pm

One can easily take all gambling elements out of investing by pound cost averaging (e.g. monthly saving) into collective investment schemes, ideally via ISAs.

Conversely, you can put it all back by spread betting in the financial markets.

wpannuitant 19 Feb 2010 , 4:44pm

The difference is when you can see that your horse is not going to win you can't get off. With investing when you can see that your objective is not going to materialise you get out. OK you've lost a bit but not the lot. At the present time there are too many conflicting signals and no discernable trend.

adetrade 19 Feb 2010 , 7:28pm

All forms of investment if they involve risk are a `gamble` although you can stack the odds in your favour. True gambling is no different and if you make use of one of the betting exchanges you are removing the house edge. Many people now make their full time income from gambling, where with the right information and research you can make a good tax free income. It take years of hard work but it can be done as can full time trading on the exchanges the advantage being that there are so many markets now available and you can trade yourself out of a bad position.

Questorien 23 Feb 2010 , 8:50pm

Terrapin1.

Is investing gambling? Clearly "YES".

Is investing only gambling and nothing else? Clearly "NO".

Everything in our lives involves some measure of chance and risk.
Is living gambling? Clearly "...er..um..."

I think a more interesting question is: "How much chance or risk does an activity have to involve before we call it gambling?"

Q.

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