Investing vs. Gambling: What’s the Difference?

August 3, 2021

Lots of individuals seem to believe that investing in the stock markets is akin to “gambling”. Why throw your money away by investing in stocks?

Instead, you may as well buy a ticket for the Singapore TOTO (lottery) in the hopes that you can hit it big with the jackpot prize! Or perhaps try your luck with the 4D?

However, nothing could be further from the truth, or more ill-advised, for those of us looking to make our money “work for us”.

That’s because long-term investing is indeed very different from gambling. Admittedly, the short-term, type of speculative trading that goes on in stock markets can make us think otherwise but this is pure speculation and can be viewed as “gambling”.

But for those of us looking to start our journey, here are some facts about why investing is very different from buying a “Quick Pick” on the TOTO.

Time in the market

We’ve all heard of the age-old market saying that “time in the market” beats “timing the market” and that’s very true.

If you look at global stock market data over the past 50 years, it clearly pays to be invested over decades and not just days or months.

That’s because the probability of you losing money when you invest in stocks is drastically reduced the longer your holding period is.

For example, if you were to invest on one specific day in global stocks from the past 50 years, you would have a 1-in-2 chance of making money – so effectively a 50/50 chance.

Start stretching that period out longer, though, and your odds get even better. If you had invested for any one year over the past half-century then your odds of generating a positive return would be 72%.

How about if you had stayed invested over 10 years? Your odds of a positive return would have improved to 93%. Crucially, if you stretched that out to beyond 13.5 years and you would never have lost money over that period.

Regardless of the time frame studied, it clearly pays off to invest your money for the long term. When you buy a TOTO ticket, though, that money disappears immediately and in a sense, is a “sunk cost” as there’s no return unless you hit the jackpot.

What about your chances of winning the Singapore Pools TOTO Hong Bao Draw in February 2021? About 1 in 13.98 million. For a normal first prize, draw the odds go down to about 1 in 3.5 million.

Buying real businesses

Unfortunately for you, if you don’t win the TOTO, you don’t actually end up with anything to show for it.

With investing, whether that’s you buying through an exchange-traded fund (ETF), mutual funds or individual stocks, you’re gaining exposure to real businesses that are growing and, in many cases, profitable.

While share prices can fluctuate, at the end of the day the data on long-term returns of stocks all point to them being reliable wealth creators.

Although it may not give you the “rush” of becoming an instant millionaire, long-term investing can help all of us construct a stable and sustainable plan for our financial health. That’s something worth investing in.


Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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