Warren Buffett: Gambling on stocks is a losing investment bet (2024)

FAQs

What does Warren Buffett say about gambling? ›

Remember this key 'fact of financial life'—and you'll avoid gambling in the market. For the speculators that are using the stock market like a casino, Buffett had one main tip: Remember who is really making money from your gambling—the House. “One fact of financial life should never be forgotten,” he wrote.

Investing is the act of committing capital to an asset like a stock, with the expectation of generating income or profit. Gambling, on the other hand, is wagering money on an uncertain outcome, that statistically is likely to be negative. A gambler owns nothing, while an investor owns a share of the underlying company.

Investors should watch out for institutions that are encouraging “foolishness” and keep in mind that rash, frenzied trading behavior helps their bottom line, not yours, Buffett said. If you invest too much of your money in a volatile individual stock, it's easy to get burned.

Investing can result in a gain as much as it can a loss and it's usually done over the short or long term. The money you invest usually gets you ownership of an asset, such as a bond, stock, or bank account. Gambling, on the other hand, almost always results in a loss and is generally a short-lived activity.

However, institutional investors do tend to have more knowledge, as these are large companies with numerous analysts specialising in a particular market. Still, the stock market is not entirely comparable to a casino. Indeed, with gambling, it is the case that you cannot predict it at all, nor explain it afterwards.

Yes, gambling can make you rich. You've probably seen articles in the media about gamblers who struck it big and made themselves rich in the process. Some of these gamblers won life changing sums of money. For example one sports bettor won nearly £1 million from just a £10 accumulator bet!

Gambling vs. Day Trading. The main difference between day trading and gambling is that gamblers play available odds while traders strategize based on market trends, price movements, and past performances.

It's a shocking statistic — approximately 90% of retail investors lose money in the stock market over the long run. With the rise of commission-free trading apps like Robinhood, more people than ever are trying their hand at stock picking.

Key Takeaways. Gambling is not a good alternative for earning extra cash. Each game you play at a casino has a statistical probability against you winning. Slot machine odds are some of the worst, ranging from a one-in-5,000 to one-in-about-34-million chance of winning the top prize when using the maximum coin play.

A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.

What is Warren Buffett's number one rule? ›

Buffett is seen by some as the best stock-picker in history and his investment philosophies have influenced countless other investors. One of his most famous sayings is "Rule No. 1: Never lose money.

His fortune is largely tied to his investment company.

The vast majority of Buffett's net worth is tied to Berkshire Hathaway, his publicly traded conglomerate that owns businesses like Geico and See's Candies and holds multibillion-dollar stakes in companies like Apple and Coca-Cola.

But gambling is typically a short-lived activity, while investing can last a lifetime. Also, gamblers can expect a negative return, on average and over the long run. On the other hand, investing in the stock market typically carries with it a positive expected return on average and over the long run.

What Paul says in 1 Corinthians 10:31 can be applied to the stock market. There Paul said, “So, whether you eat or drink, or whatever you do, do all to the glory of God.” Certainly, investing in the stock market falls under “or whatever you do.” If you can do it to the glory of God, then do it.

You can make a much higher return using options, but you run the risk of a complete loss if you're wrong. Options can allow you to generate income. Some stockholders sell call options against their stock positions or write put options as a way to create income.

Albert Einstein supposedly once said: “No one can win at roulette unless he steals money from the table while the croupier isn't looking.”

Research shows that people with comparatively higher incomes are more tolerant of risk, and more drawn to thrill seeking and risk-taking activities. Studies also find them to have a more optimistic outlook when it comes to predicting outcomes. This aligns with gambling behavior.

Bill Benter - $1.55 Billion

Benter was only 22 years old when he left university, moved to Las Vegas, and started playing blackjack. With his interest and skill in gambling mathematics, he was able to beat the odds at winning blackjack hands, helping him become one of the richest gamblers in the world today.

Rule 1: Do not gamble with money you cannot afford to lose.