Investing vs. gambling: clearing up the myths

Feeling jittery about putting your money into the markets is totally normal, especially if you’re new to it. But think of investing as less of a high dive and more of a steady swim.  

Once you get the hang of the basics, exploring shares, bonds, or funds doesn’t need to be a heart-pounding experience. With a little knowledge, you’ll be making informed investing moves like a pro. 

Investing vs. gambling: what’s the difference? 

Gambling is like rolling the dice on things you can’t predict, like which football team will win or which horse will cross the finish line first. It’s all about luck and guesswork. 

Investing, however, is about making smart choices with your money. When you buy shares, you’re owning a piece of a company. Bonds are like giving a loan to a company or government, and funds mix and match these assets. Unlike gambling, you have access to tons of information about these investments, so you can make decisions based on facts rather than gut feelings. 

Understanding risk 

Think of investments as rungs on a ladder, with lower-risk investments at the bottom and higher-risk ones at the top. Shares, which tend to come with more ups and downs, are closer to the top, while bonds and funds with a mix of assets are lower down. 

Funds, depending on their makeup, can vary in risk. For example, an equity fund contains mainly shares, while a multi-asset fund includes shares, bonds or other asset classes. 

Different investments carry different levels of risk. Lower-risk investments, like government bonds or stable corporate bonds, tend to offer lower returns. Higher-risk investments, such as emerging companies or bonds from less stable governments, might offer higher returns but come with more uncertainty. 

Spreading risk 

One effective way to manage risk is by investing in a diversified fund. These funds spread your money across various asset classes, sectors, and regions, reducing the impact of poor performance from any single investment. This approach helps cushion against market fluctuations and can often be more cost-effective than building and managing a diverse portfolio yourself. 

Investing simply isn’t gambling 

There are a few more differences between the two, e.g. how you make money.  

Investing offers several ways to make money. You can benefit from growth if the value of your investments increases. Investments can also provide income, such as dividends from shares or interest from bonds. Even if things don’t go as planned, you might be able to recover some of your investment if you sell at a lower price. 

Gambling, however, usually means it’s all or nothing, with fewer opportunities to get something back if things don’t pan out. 

Wrapping up 

While investing involves risk, it’s not the same as gambling. By understanding the risks and learning the basics, you can make smart decisions that align with your goals and risk tolerance. 

🔔 Just remember, the value of your investments can go down as well as up. Dodl doesn’t give advice, so if you’re unsure about investing, it’s always best to speak to a financial adviser.