The offers and details on this page may have updated or changed since the time of publication. See our article on Business Insider for current information.
Paid non-client promotion: Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate investing products to write unbiased product reviews.
AsiaVision/Getty Images
Gambling is a high-risk, heart-pounding activity that can drain people's wallets. While some hands-on traders approach betting on the stock market similarly to betting money on sports, the truth is they should have very little in common.
"Good investing isn't exciting, but gambling is," Dan Egan, a financial planner and VP of behavioral finance and investing at Betterment, told Business Insider.
Both involve predicting outcomes to make money. Both provide statistics for analysis. Both promise money on the other side. So what makes sports betting and investing so different? Here's the breakdown.
Egan says the availability of smartphones plays a huge role in people's willingness to make risky bets and participate in emotionally reactionary stock trading behaviors.
Similar to popular online gambling sites, some mobile investing platforms have employed gamification techniques to encourage participation in riskier strategies, making it easier for you to forget that actual money is on the line when you're climbing the ranks of a competitive leaderboard or earning in-app achievements.
Robinhood is the most notable example. Before Massachusetts regulators filed a complaint in 2020 accusing Robinhood of using a gamification strategy to attract and manipulate inexperienced investors, investors used to see a virtual burst of confetti users after placing a trade. Robinhood removed the feature and agreed to pay a $7.5 million fine to settle the charges in 2024.
Betting money on sports or participating in risky trades can be OK if you're playing with money you can afford to lose. But it isn't a viable strategy for accumulating long-lasting wealth.
The get-rich-quick mentality associated with hand-picking stocks or betting on sports games can lead to excessive risk-taking. While the possibility of generating short-term gains with minimal effort sounds appealing, most people end up experiencing greater overall loss.
A working paper published in August by researchers at the University of California, Los Angeles, and the University of Southern California found that online sports betting is causing financial problems for many Americans, particularly young men. Instead of saving money, paying off debt, or investing, people are spending it on gambling.
"Strategies like day trading, picking out single stocks, or leveraging make investing a little too exciting, and that's where you need to be careful," Egan said.
The best way to generate wealth is through neither stock-picking nor gambling, but through a different investing strategy altogether: long-term risk-adjusted investments that consider your financial goals and risk tolerance. Compared to sports betting, investing in the stock market should be "non-adrenaline focused," Egan said. "Sports betting is about the thrill. The money is a way for people to amplify that thrill."
Like watching paint dry, the returns on your investments should feel painfully slow and largely predictable. Most financial advisors recommend diversifying your portfolio with a range of stocks, bonds, and other investable securities. Gambling doesn't work the same way.
"With investing, you can put money into a well-diversified, low-cost portfolio and 'win,'" Egan says, "whereas if you put a lot of money into a bunch of diversified bets, usually you would just get poor very quickly."
The value of an individual stock fluctuates based on market sentiment and economic factors. Diversified portfolios offer a safer alternative to hand-picking individual stocks, decreasing the chance of experiencing significant setbacks. Investing in and within various market sectors can significantly reduce your exposure to market risk and volatility.
Moreover, unlike gambling on a single company or game, a diversified approach increases your chances of capitalizing on different opportunities in the market.
The truth is responsible investing isn't fun. While an explosion of confetti might make trading stocks more entertaining, investing in the stock market should be boring.
A long-term, diversified buy-and-hold strategy offers a safer and more profitable approach than frequent trading. Historically, the average stock market return is about 10% each year. While it may lack the thrill of stock picking or sports betting, a diversified portfolio provides a more sustainable path to wealth growth with significantly less risk.
Let's say you normally bet $20 a month on sports. If you invest $20 monthly in an index fund that tracks the S&P 500 instead, you'll generate around $250 after the first year ($20 x 12 *0.1). After five years, you'll have over $1,500. After 10 years, you'll have almost $4,000. And if you lose money? Leave it alone — you should be able to recoup any losses over time.
Beginners can create a diversified investment portfolio using beginner-friendly apps like SoFi Invest, Ally Invest, or Acorns.
You can start by developing a clear financial plan that aligns with your goals and economic situation. Ensure you understand your risk tolerance and implement an investment strategy that suits your needs. For a hands-off approach, consider one of the best robo-advisors, which automates portfolio management and makes long-term investing easy with a set-it-and-forget strategy.
