this post was submitted on 17 Jun 2024
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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?

Or Jerry and Marge Selbee?

Is this just another semantic hotdogs are sandwiches discussion or is there an agreed threshold?

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[–] anon6789@lemmy.world 2 points 5 months ago

This is the closest answer to what I'd agree with. It's a shame the other top comment turned into something of a squabble, because I agree with a lot of what was said there as well.

Investing always comes with some risk. Buying land or a house is typically considered a safe investment in most of the world. But that house/land can undergo a natural disaster and be ruined. Putting money into anything not insured (FDIC in the US, for example) carries a non-zero percentage of risk.

At what point does that risk cross over into gambling? I'd say when you exceed your personal risk assessment level. I have what is typically considered a higher risk portfolio. I am in my 40's, 90+ % invested in stocks, with a definite tilt to growth stocks. I have been in that same position since I started investing at 16 in a Roth IRA. I've been through a few financial crisis periods and have always held firm to my belief that in my investing timeframe that my strategy is sound. Never sweated it for a second, even when my balance was small, so as it went negative before I could afford to actively contribute much to building my balance. Now I am very solid into 6 figures, and I only earn average for my state, which is 58k, but that is fairly recent.

To get the type of growth I feel I need with the pay I get, I went in knowing I would have to assume more risk. So I did a lot of work to understand the safest methods to get that growth in exchange for the volatility that can be involved in that investment approach. I was willing to accept that risk, and I stand by it decades later. If I started playing with riskier fund choices, that'd be gambling. Some mega-big growth funds can be very tempting. But the fees for those funds are guaranteed while the gains are not. So chasing an extra 1 or 2% isn't worth that added risk to me. Things like options and stock shorting I don't understand well, so I stay away from them since I don't understand the associated risks. That stuff is gambling, where you can't count on yourself to have at least a sensible margin of control over what happens.

If you are new to investing or feel confused, I always suggest the Boglehead's Guide to Investing. It's not trying to sell you anything and explains things in pretty easy to digest terms and tells you how to develop a simple investing strategy that you can stick to and be a relatively hands off investor. It used to be free online, but I think that's caught up in the Hachette vs Internet Archive lawsuit, so you can check out their Getting Started wiki which is an abbreviated version of the book, plus some new and updated stuff.