Do you know the difference between playing craps and investing in the stock market? In my opinion, absolutely nothing! There is very little difference between playing craps and investing in the stock market. Some stocks have a high risk factor with a possibility and expectation of higher return, while other stocks have a lower risk factor, but also with an expectation of lower return. Likewise, some craps bets have a higher risk factor with a larger payout while other craps bets have a lower risk factor with a lower payout win rate.
There are many similarities between the different types of stock investing and the game of craps. For example, investing in stock options is extremely risky compared to investing in conservative dividend-paying stocks, like Disney, Coca Cola or MacDonald’s. Stock options will allow you to make huge profits, but with a lot of risk. Investing in conservative companies will carry less risk, but will provide you with much lower profits. Of course, you can still lose money by investing in conservative companies.
In craps, you can bet on a 2 or a 12 that will net you the most profit (pays 30 to 1), but it also has the greatest risk of losing (less than 3% chance of winning). Or, you can bet on 6 and 8 which have lower payouts but also lower risk of losing. Like investing in stocks, a craps player will have a chance of losing even on low risk bets.
Webster’s New World Dictionary, Compact School and Office Edition, defines “Investing” as “putting (money) in business, bonds, etc., in order to obtain a profit”. The Webster Dictionary defines “bet” as “1. playing games of chance for money, etc.” 2. take a risk for an advantageous position ”. By comparing the definitions of “Investing” to “Betting”, one can ensure that if you are investing, you are investing money in stocks (companies) or bonds or bank certificates of deposit in order to make a profit. . If you “gamble” (play craps), you put money (a bet) on a portion of the craps table layout in order to win money. Depending on how you invest and how you bet while playing craps, you are more likely to win money or lose your money.
If you listen to financial radio talk show hosts and their guests, and watch funded television programs (CNBC), as well as investment magazines and publications, you will notice investment philosophies similar to those we suggest to play craps. Some of the comparisons are as follows:
1. “Investing always involves risk. – – Don McDonald, Nationally Subscribed Talk Show Host, 1/24/01. Bob Brinker of Money Talk also said something along the same lines.
Translation: Playing craps always comes with risk.
2. An American Century ad in Smart Money Magazine, January 2001, page 58, states in part the following:
“It’s knowing that teamwork and a disciplined approach can produce strong, long-term results.” See also, Money Magazine, December 2000, page 30.
Translation: Playing craps with a disciplined approach can yield solid, long-term results.
3. TD Ameritrade in its disclosure to investors on options (2008) states in part:
We know that options can be an important part of your investment strategy. . .
Options are not suitable for all investors as the special risks inherent in options trading can expose investors to potentially rapid and substantial losses.
Translation: Playing craps isn’t for everyone. Playing craps can expose individuals to potentially rapid and substantial losses.
If you apply sound investing techniques and trading principles to playing craps, you should be able to minimize your losses while maximizing your profits (winnings). Just remember – – since there is no foolproof strategy for investing, there is no foolproof strategy for playing craps.