What is the boundary between investment and gambling?⑤ Summary — Considering the performance of the world's top investors — Tokyo Institute of Global Studies —

Hello everyone!

We are the Tokyo General Research Institute staff team!

As the final episode of the series "Where is the boundary between investment and gambling?", we would like to summarize.

Through this summary, you will understand what is different between investment and gambling, and where you should invest your money.

First, to review the four return rates we have seen so far,

• Publicly run competitions...about 75%
• Casinos...90–99%approximately
• Lotteries...about 50%
• Stocks/FX...99.9%(over 100% in the long term)

There was.

Warren Buffett, the world’s greatest investor, has achieved a 20.9% annual return for 53 years.

The annual return of the S&P 500 is 8.7%, so Buffett has, relative to the market average, plus 12% advantage.

Let's look at public gambling and lotteries.

Even if you could achieve Buffett-level results in publicly run competitions or lotteries, the return rate would never reach 100%.

In other words, even masters of publicly run competitions or lotteries cannot profit in the long term (though lotteries are purely luck, so there may not be any masters... haha).

Therefore, public gambling and lotteries can be said to be pure gambling.

What about casinos?

In casinos, you can use card counting and other methods to push the return rate beyond 100%.

However, if you’re caught, you’ll basically be banned.

The casino operators monitor players who are making profits as suspicious individuals.

In fact, a group of MIT Blackjack Team students from Massachusetts Institute of Technology challenged card counting, but eventually were cornered by casino management.

Therefore, casinos are also gambling because it is difficult to keep winning.

What about FX and stocks?

Short-term trading in FX and stocks is generally called speculation.

According to Weblio,

Speculation refers to

a trading activity conducted with the aim of profits from price differences by predicting future price movements

.

Gambling, on the other hand, the house takes most of the profits, whereas in speculation there is no house, so skilled people take all the profits.

 
Therefore, if you have the ability, it can be a sufficient asset management methodto consider.

Conversely, for those who cannot win, it can be akin to gambling.

In the case of long-term stock trading,you invest funds with the expectation of future stable returnstherefore, the gambling nature is extremely low, and it can be considered investment.

However, as stocks, the risk is higher than bank deposits or bonds.

Which is the best?

From the above considerations, the remaining options are speculative FX/stock short-term trading or long-term stock investing.

Which is better?

Speculation has the advantage of the potential for enormous returns in a short period.

The downside is that if you lack skill, you can quickly lose your funds.

The advantage of investing is to steadily achieve returns.

The downside is that asset growth is slow.

It may not suit impatient people.

Which to choose varies from person to person.

Choosing the path that fits your personality is very important.

Please apply what you learned from the "Where is the boundary between investment and gambling?" series to your own asset management.

～ For those who want more detailed information on investment ～

①Here is our representative's blog!