Can a smart investor be a regular lottery/casino player?

By: ispeculatornew
Date posted: 04.07.2011 (5:00 am) | Write a Comment  (7 Comments)

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It’s no secret, lottery and casino are the most “regressive” ways to tax a population. Why do I say that? Generally, rightfully or not, taxes are deemed to be “regressive” if they go after the less fortunate persons of a society. This does not really apply when private companies are running things but in many parts of North America (and the world), lotteries and casinos are ran by governments. Why? Because they are such a great business.

The house does not lose money

Apart from a few exceptions, casinos and lotteries simply cannot lose money. Why? Simple. Offer customers to play a game that has odds against them and over time, it is no longer a game of luck. Rather, the house will win time after time after time. I recently step foot in a casino  and because it was my birthday, I decided to give it a try with $20. Not because I expcted to win or even felt I would or even could get lucky but simply because I wanted a little fun for my big night.

I did end up losing that money very quickly and did not get much satisfaction out of it. But that’s not the point really. The main thing is that I could not fully enjoy the experience because I knew I was playing a game that would put me on the losing end almost every time. Last week, I wrote about margin investing and about the importance as Warren Buffet described it to “stay in the game”.

Being rational or not?

It might be an impression but I think that most good investors generally act in a very rational way. Why? Because it’s the only way to stay alive. Trading derivatives, buying leveraged products and others investing methods can all be successful. But if they are not done in a rational and methodical way, they will usually mean big losses.

If you are being rational…why would you buy lottery tickets or play casino games?

I do understand that you can get a certain thrill by playing these games but when you know that the odds are so terrible (casinos often pay out less than 50% of what they receive), why not do something else with your money?

Is it me or is sports betting different?

I might be completely off here but as much as I talk badly about lottery/casinos, I have been a user of Betfair and found it to be different. I have not been able to make consistent money at all times but in the sports that I do bet on, I have been able to be profitable in 4 of the 5 last years (this year being the losing one) and while it’s not even close enough for me to consider joining a sports betting hedge fund, I would certainly not exclude it from a future possibility.

Am I kidding myself?

Is Sports Betting different than casino games and lotteries or is it all the same thing? And do you invest in the markets AND play these games? I’d love to hear your point of view!

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  1. Comment by Ravi Gupta — April 7, 2011 @ 6:31 am

    I’ve set foot into a casino but I have never gambled. I’ve seen to many people go to GA (Gambers Anonymous). Gambling in any form is addicting. I haven’t bought the ETFs for my Roth RIA yet and even now I’m checking them constantly.
    My plan is to never buy into individual stocks because it represents too high of a risk. Everything else in terms of absolute gambling is a no go.
    With all of that being said some people are great gamblers and live for the risk. Some of that risk can be hedged, and statistics can be a great tool. In the end though it is considered a gamble because the outcome is 100%.

    -Ravi Gupta

  2. Comment by Phillip — April 7, 2011 @ 10:08 am

    I prefer to think of time spent in a casino as entertainment. I don’t mind paying X amount to have a fun time playing games for a few hours. If I win money, that’s just a bonus and one that can’t be had through other forms of entertainment (e.g. movies). So for me it’s no different than kids going to an arcade. It might still be a waste of money but at least it can be fun.

    Sports betting to me seems to be more in line with the regular lottery. You’re making a bet and that’s it – it requires no more involvement from you. While it may add to the ‘fun’ of watching a game knowing you have something riding on it, you’re not part of the game in any way.

  3. Comment by IS — April 9, 2011 @ 5:25 am

    @Ravi – True, some are very successful at it and I guess if you are disciplined enough or are playing with a small pre-determined amount for fun, then yeah, wouldn’t see any link!

    @Phillip – Can see that, absolutely and I have been a few times into a casino with that exact thinking. However, I would personally say that for me sports betting is the same but even better since it gets me “excited” about a game between 2 teams that I do not like that much.

  4. Comment by Ben Gan — April 13, 2011 @ 8:47 pm

    The only winner in the casino or lottery game is the house or the banker. When odds are not in your favor, over time, you are bound to lose. Unfortunately many people do not realize. It’s okay if you bet what you can comfortably lose and get some excitement out of it once in awhile. Don’t ever think you can beat the house, whether it gaming or gambling.

  5. Comment by IS — April 14, 2011 @ 3:22 am

    @Ben – No doubt, couldn’t agree more.

  6. Comment by Edde — April 22, 2011 @ 1:01 pm

    Hey, folks, the only way you can beat the casino is be discipline and do exactly what Kenny Rogers’ song “The gambler”. You MUST NOT be greedy and MUST KNOW when to hold, when to fold, and when to get up and go. I.E. HIT & RUN, babe.

  7. Comment by IS — April 24, 2011 @ 10:52 am

    @Edde – So you do play? What game? Blackjack?

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