Risks to your money: Investing, Shares and Gambling
Over the last few years, I’ve had numerous opportunities to find out about ways of making your money grow. I’ve written about no-risk matched betting and how it can be used to extract extra tax-free cash from betting exchanges and bookmakers. I’ve also written about investment opportunities in the forms of ISAs, SIPPs and savings accounts. I’ve also made the move recently to start investing in shares on the London Stock Exchange, something I’ll be writing about soon. But one thing that often sparks conversation if what is a safe way to increase your wealth with minimal risk?
When does investing become gambling?
Well, there’s always a disclaimer when you sign up to a new stocks and shares trading account. Often it will say something like “your money is at risk” or “the value of shares can go up and down and past performance is no indicator of future returns”. This is because investing in the stock exchange is just like gambling on the horses or in a Las Vegas casino. It’s an educated guess at the outcome of a future event that is heavily dependent on uncontrollable events.
When it comes to a share portfolio, financial advisers will often suggest spreading the risk by investing in a fund or share portfolio that can balance the risk more widely, covering a loss in one area by returns in others. In general, managed investment funds return better than savings, but it strays into more risky waters when share investments speculate on larger expected forecasts and these often require investment over the long term (a good number of years).
So, what are the main differences between investing and gambling?
Whilst there are similarities, there are also a number of marked differences that are important to note:
- Your funding to either a stock and shares portfolio or a gambling account is entirely at risk. Any share can lose a massive amount of value in one day’s trading and similarly 100% of a gambled pot of money can be lost instantly, despite the “potential” odds and gain.
- Both methods, in theory, employ minimizing risk and maximizing profits via consulting either the odds/tips or investor reports and news.
- Long term, investing is less risky than gambling where short term wins can be lost via future losses. Investing is usually and long-term method of increasing one’s worth.
- There are more options, including managed and bot-controlled investment portfolios that help to mitigate the risks, whereas in gambling there is no such method of reducing the risk long term. Also, information tends to be more formal and researched and opposed to a bookie’s tip or hearsay involved in gambling.
Gambling versus Matched Betting
It’s frequently misunderstood, but matched betting is not gambling. Why? Well, because the process of matched betting factors in all outcomes of a bet. This is a deliberate process to lose a small amount on a qualifying bet and extract “free” sign up bonuses from the betting sites. It’s easy to learn and I highly recommend reading my other articles about how I made money from my matched betting blog.
Part of these offers may include extra perks and casino/slot bonuses which are pure gambling and there’s no guarantee of winning with the odds, over the long term. Either way, there are casino operators that offer demos and welcome bonuses so you can try out the games and have some fun. One online casino operator that has those characteristics, offering to their players welcome Bonuses, Expanding Wilds, Free Spins, daily Jackpots and a huge portfolio of games, is the well-known 888 Casino, making it a great place to experience gambling for real money.
Are there variations in risk and costs when investing in stocks and shares?
In the UK there are three different types of stocks and shareholding accounts. Each of these account types offers a different perk and also a different con. The three types of account are GIA, SIPP and ISA.
I’ll try and see if I can summarize these three different types of investment accounts and how they may impact on your investing outcomes. It’s important to make you aware that most of the costs involved with trading come from capital gains tax and other fees upon redemption.
GIA – Also and no known as a General investment account is the easiest way to get into trading with stocks and shares on the open market. One of the easiest ways to get into trading virtually via electronic apps is using the freetrade share investment app where you can get a free share just by signing up via our link worth up to £200! This type of account is ideal for small amounts of trading and for getting a feel for how the market work. It’s important to realise however that if you are selling your stocks off and likely to have more than £11,000 in net profit, you’ll need to pay Captial Gains Tax. One thing to be aware of is that this profit isn’t just looked at annually. It is compounded over time continuously so it’s easy for you to have small annual profits that suddenly stack up to more than 11k one year – and that’s when the tax will hit you. This can be a major headache and is why a General investment account is ideal just for trading small amounts and getting used to the markets. For more long term trading, I would look into ISAs and SIPPs as outlined below in order to avoid the tax costs.
ISA – Places are great things particularly if you’re planning on investing over the long term. They are beautifully wrapped tax-free bundles which still allows you to trade on both stocks and shares within the UK. any dividends but payable for the stocks and shares you have are also protected by immunity from tax. There’s a cap on the amount you can invest in any tax year however if you’re looking to build a portfolio over time that could become quite large this is a good way of doing it.
SIPP – Also known as a self-invested personal pension this works in a similar way to an ISA except for the fact you cannot withdraw the funds in general until you are 55. One of the additional perks of this in comparison to an ISA is the fact that the government recognise this invention and therefore will invest 25% as a contribution towards your retirement. There can be some costs when redeeming, however many of these can be reduced if you withdrawal carefully and prudently at a paced rate.
So you can see, even within traditional stocks and shares investments, there’s not only exposure and risk but also tax implications. I highly recommend you consider carefully if gambling is realistic as an alternative to informed investing in stocks and shares.
NOTE: This article is for entertainment purposes only and does not constitute advice. When investing or gambling, your money is at risk. You should seek your own information on whether or not to invest.
