Is Investing in the Stock Market a Form of Gambling?
Currently, the S&P 500 Index (a popular gauge of health for the US Stock Market) is down in value by approximately 21% for the year as of June 21, 2022. That can be a rude awakening after the S&P 500 has returned 28.9%, 16.3%, and 26.9% over the past three calendar years (2019-2021).
What’s going on? In times like these, it can make an investor question if having money in the stock market is wise or if it’s really just gambling.
The Differences Between Stock Market Investing and Gambling
I would suggest that while there are some similarities in that the range of potential outcomes varies, there are some major differences between investing in the stock market and gambling. Investing in the stock market isn’t gambling and here’s why:
Odds Over Time
The longer you gamble, the more likely you are to lose money. Over time, the house wins more and more because the odds are not in your favor. How do casinos stay in business? They keep more money than they give away. In 2019 before the pandemic shutdowns, the US commercial casino gaming industry’s revenue was $43.6 billion.
It’s been the opposite with the US stock market. Over the last 100 years or so, if you invested in the US stock market your returns are likely around 10% per year on average.
In the short-term, you may have a bad month, quarter, or even year (e.g. 2008) but over longer periods of time, the stock market has consistently provided positive returns. With gambling, you see the exact opposite trend.
Winners & Losers
Gambling has limited potential. The pot of money is a fixed size, so in order to have winners, you have to have losers. For the casinos to have $43.6 billion in revenue, gamblers have to have lost $43.6 billion.
With the stock market, everyone can win. You aren’t trading money over a blackjack table, but rather investing in companies with unlimited potential.
You make money in the stock market when the value of the companies you invest in grows over time. For example, if you invest in a car company and earn money because their stock price goes up, someone else didn’t have to lose for you to earn that money. Instead, the car company made a good product that people wanted to purchase because it allowed them to transport their family more safely, comfortably, and efficiently.
The consumers win by having their needs met and the investors win as the value of the company increases. When you are an investor in a company, you are a part owner, thus earning a portion of their return.
Opportunity to Do Good
When you gamble, you’re just funding the casino with the money you lose. With investing, you can do good in the world and still end up with more money. You can do so by investing in companies that are doing good in the world. There are a lot of opportunities available through faith-based investing, socially-responsible investing, and the like to align your finances with your values and do good while growing your resources.
In summary, investing and gambling are two very different activities that usually have very different outcomes. We believe that gambling with large sums of money is foolish while investing is wise when done thoughtfully and prudently. In fact, the bible even encourages investing in Jesus’ parable of the talents in Matthew 25:14-30.
Are you investing thoughtfully and prudently? Or do your investments feel more like gambling?
Our Christian Financial Advisor Network advisors are professionals who understand the crossroads between biblical stewardship and modern investments. If you’re looking for someone to come alongside you so that your future feels like less of a gamble, consider reaching out to one of our advisors for help.
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