When is investing gambling?

I was browsing a new finance forum the other day and came across a great question from a self-confessed ‘beginner investor’.

He asked:

“Where can I learn how to trade with a few thou for the short term (<3mo) with greater than 20% return. I’ve never invested anything. I know that long term investing seems much easier from what i’ve read ie. value investing with stock screens, but what is another good strategy? I am looking for a strategy, teacher, website, anything to start learning, but with a goal of putting money in the market. I’m not interested in funds or managers.”

That, my friends, is called ‘gambling’ not ‘investing’!

You see, when evaluating ANY so-called ‘investment strategy’ you have to consider the return that you can make against ‘market norms’ …

… which is a very simple way of saying “if I can do it … and I don’t have any SPECIAL INSIDER KNOWLEDGE that makes me SPECIAL … then why isn’t EVERYBODY doing it?”

The answer is, of course, is: it’s simply NOT possible … otherwise EVERYBODY would be doing it, already!

… unless you get extremely lucky (which is why what you want to achieve is called ‘speculating = gambling’).

A friend and I had a similar conversation the other day …

He is becoming a professional speaker and consultant; he has already made a great start by writing and self-publishing a book and already has some paid speaking engagements.

BUT, his target is to earn $200k next year … just from speaking/consulting, as a near-beginner!

So I asked him: “How many corporate executives, with expertise in your specific area [customer service] earn anything close to your $200k target right now?”

He said: “Not many … that’s a BIG corporate salary …”

Next, I asked him: “How many of them could write and speak about customer service?”

He answered: “Probably a lot more than you’d expect, especially if they knew that was $200k on the line …”

“Exactly!” I said, almost jumping out of my chair: “So, why would any of them work for somebody else, if they could simply write a book then earn $200k … with the added benefit of lots of travel, flexible hours, and no boss?”

“Hmmmm” he said, his brain obviously (finally) ticking over: “They wouldn’t!”

Which was exactly the point that I was trying to get across:

It simply CAN’T be DONE, by the average person … otherwise, they would all be doing it!

Of course, there are PLENTY of speakers and consultants earning $200k or way more – as there are plenty of people in all areas of ‘investment’ (stocks, options, currencies, futures, real-estate, business, etc, etc) earning outstanding returns even in a crappy market – but …

… they generally have SPECIAL INSIDER KNOWLEDGE that makes them SPECIAL … or, they work MUCH harder than anybody else and/or they get extremely LUCKY …

So, what would you tell our ‘Beginner Investor’?

I would say, when evaluating any opportunity or even your own investing goals and strategy consider:

1. Are you investing – in which case, you should expect ‘normal’ rates of return over the long haul, or

2. Are you really gambling – in which case, the sky is the limit … but, the ground could equally rush up to meet you …

depending upon how lucky you get.

BOTH have a place in your journey towards $7million in 7 years (or whatever target you set for yourself)  … it’s how I did it …


But, always be very clear on when and why you are investing and when and why you are gambling.


I’d like to hear your views …

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3 thoughts on “When is investing gambling?

  1. Hi,
    Its really fantastic to read this kind of the post .This is really a good creation . This is really awesome .A billion here and a billion there, and pretty soon you’re talking real money.Money never made a man happy yet, nor will it. There is nothing in its nature to produce happiness. The more a man has, the more he wants. Instead of filling a vacuum, it makes one….. Thanks

  2. Thanks for your post, Trade Deficit. I suspect that you are not saying that MONEY is meaningless (for example, YOU accept advertising on your site, even though I don’t)?

    Now, let’s say that you have an interest in Photography?

    What’s YOUR Life’s Dream: it could very simple, or it could be profound, such as to “catalog the world in picture” or “give every animal a home [in print]” …

    That kind of dream needs to be ‘converted’ into practical time and currency: is your ‘day job’ restricting the amount of time that you can put in to your Life’s Dream? Does that mean you need an outside ‘passive’ income to replace your current income from working your commitments … as well as pay for equipment, travel, and so on?

    If so, how much? Now multiply that annual number by 20 to 40 …

    THAT, my friend, is how much money YOU need to live YOUR LIFE … or you can just compromise on your dreams, because when it comes to money “there is nothing in its nature to produce happiness” 😉

  3. Pingback: The myth of consulting …- 7million7years

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