Investors are somewhat like gamblers – when the consequences of a transaction are unpredictable, any decision can carry both a big win and the risk of ruin. But nevertheless, there is a difference between these concepts – and we will talk about it.
What is the difference between a casino and an exchange?
Casino gambling and investing are the same thing. Casino gambling has a certain probability, but the risk of losing money is low. Some types of investment involve a lot of uncertainty based on probabilities, but risks can be managed quite well.
Another key difference between investing and gambling is diversification . Investing provides an opportunity to distribute risk across all asset classes, while players invest their capital in one bank without a strategy to reduce losses.
An investor can prevent a complete loss of capital by selling if necessary or when he believes it is the right investment decision. In gambling, it’s up to you, you can play at one of the best casinos Neon54.
Players have fewer ways to cut losses than investors. Investors have more sources of relevant information than players. Investing gives ownership of an asset that can appreciate in value over time. Gambling is betting on the outcome of an event. They have no ownership, no interest or dividends to receive.
Gambling is usually short-lived, while investing in stocks can last a lifetime . In fact, the investor is not a player at all, because his profit is guaranteed over time. Conventionally, a player can be called someone who gets a thrill from investment activities.
There are many so-called investors who act more like gamblers, especially when it comes to the expectation of profit with the corresponding risk.
True investing is as boring as looking at a slowly growing tree . This is a business task that requires the disciplined execution of a predetermined strategy devoid of emotional excitement.
Why is excitement dangerous for an investor?
There’s an old saying on Wall Street that two emotions drive the market: fear and greed.
If you succumb to these emotions, you can seriously harm your financial well-being, investor portfolios, the stock market, and even the economy.
Excitement or passion is an emotional state associated with the anticipation of success. This is a strong emotional attitude of a person to an activity that he considers important, investing all the resources in it: time, effort and finances.
What Happens When Strong Emotions Influence Investment Decisions .
People with an obsessive passion for gambling tend to make bad decisions, which over time can lead to serious losses.
A study published in the journal Motivation Science states that obsessive passion predicts gambling decisions, with significant implications for psychological and financial well-being.
For example, trading with the promise of high returns, complete financial freedom, or a frenetic ups and downs can become an addiction for some people, just like alcohol or gambling .
What is common between an investor and a lover of “losing” in a casino?
Gamblers, investors and speculators share similar cognitive, motivational and personality traits that are particularly strong in relation to gambling and speculation, according to a study published in the journal Behavioral Addictions.
The difference between investing and speculating is the degree of risk. Investing involves buying assets with the intention of holding them for a long time, except for high-frequency algorithmic trading, while speculating involves trying to capitalize on market inefficiencies for profit.
Although speculators often make informed decisions, speculation cannot be classified as a traditional investment due to the higher risks involved.
The propensity for high levels of financial risk is another conceptual attribute that defines gambling and speculation. If the business that you are obsessed with, whether it is trading or gambling, has taken over your life and worsens it, then it is very important to recognize the problem and seek help from a specialist in time.
Like any serious addiction, trading addiction can cost you your job, relationships and, of course, financial resources.
How to deal with passion and the desire to “recoup”?
The three main emotions that negatively influence investment decisions are fear, greed, and frustration or impatience . Letting these emotions drive your investment behavior can be costly.
Excitement often manifests itself in people, mainly due to the emotional high that they get due to the excitement and activity in the financial markets.
Falling under the power of emotions, a person turns into a gambler and is unlikely to succeed in many transactions that will ultimately lead to catastrophic financial losses.
Ramsey Dave (Dave Ramsey), an American financial advisor, author of a number of bestselling books, said that personal finance is not a mathematical problem, but a behavioral problem. Investors are often emotional and this can have costly consequences.
It takes a conscious effort to refrain from affective investing and an understanding of the concept of behavioral finance , which covers the emotional side of investing.
Revealing the hidden motives behind our actions can help us change the way we make decisions in the future.
- Avoiding emotional investing starts with a mindset shift.
- Emotions can serve you well in your personal life, but they have no place in your investment decisions.
- Make sure you have your emotions under control before making any investment decisions.
By managing your own emotions, you will be able to make smart investment decisions free from worry, fear, and greed. Try to play and get your bonus at melhores cassinos online confiáveis, test your luck
If we associate gambling with investing, then some people will forgo the benefits of owning stocks or other marketable securities. Misconceptions about investing can greatly limit the accumulation of wealth.