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3 Surprising Lessons That Betting Can Teach Us About Investing

24 May 2021 No Comment

Many people consider gambling to be merely a form of entertainment or vice – something that you should only indulge in if you are prepared to lose. While this is true, it also overlooks some of the important things that betting can teach us.

After all, many people frequently compare the stock market to a casino or sportsbook, where investors are essentially betting billions in the hopes that their horse will come through. Beyond crude analogies like this, experienced bettors actually have a lot to teach us about investing and personal finance. Read on to find out what.

1. The Importance of Risk Capital

One of the most important things that betting can teach us about investing is the necessity of risk capital. In investing terms, risk capital is the percentage of your portfolio that you are essentially willing to lose. It is money you are investing on riskier assets that nonetheless have a much higher chance of skyrocketing in value and generating greater returns.

With all gambling, those who roll the dice must be prepared to lose. A successful bettor would never wager money they weren’t comfortable losing. This way, losses are not so keenly felt, while winnings remain an exciting prospect.

2. Staying Informed is Crucial

Top investors tend to have multiple computer screens constantly feeding them huge amounts of information about financial markets. Bloomberg, Barrons, Quartz, and Insider are just some examples of companies that have built vast empires simply by selling economic information to investors. The importance of staying informed applies equally to gambling – especially sports betting.

Making smart bets on sports teams requires an ability to stay informed on the best teams and players in the league. That’s why major sports betting platforms such as Bet 365 have dedicated news and insights pages for their members – to keep them up to date on the information that could affect their bets.

3. Understanding Risk vs Reward

Any seasoned investor will tell you that the first rule of wealth creation is that the amount of reward you can hope to claim from an investment is directly proportional to the level of risk you are willing to take. This truism holds the same for all forms of betting.

If you bet on a football team that has 30/1 odds of success, your risk and reward are both much higher than if you were to wager on a team that only has 7/1 odds of winning. Sure, your rate of return is always going to be lower in general if you make risker moves.

However, an appetite for risk is essential if you ever want the opportunity to hit the jackpot. This is one of the single most important lessons that any investor can learn from the world of gambling and sports betting.

Many people would think that investing and betting do not have a lot in common. However, as these age-old lessons show us, the two practices are more closely related than many people might think.

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