Do you know the difference between playing dice 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 the possibility and expectation of higher return, while other stocks have a lower risk factor but also a lower return expectation. Similarly, some craps bets have a higher risk factor with a higher win payout, while other craps bets have a lower risk factor with a lower rate for win payout.
There are many similarities between various types of stock investing and playing 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 earn big profits, but with a lot of risk. Investing in conservative companies will have less risk, but will give you much less profit. Of course, you can still lose money by investing in conservative companies.
In craps, you can bet on a 2 or 12 which will give you the highest win (pays 30 to 1), but also has the highest risk of losing (less than 3% chance of winning). Or, you can bet on the 6 and 8, which have lower win payouts, but also a lower risk of losing. Just like investing in stocks, a craps player will have the chance to lose even on low risk bets.
Webster’s New World Dictionary, Compact School and Office Edition, defines “Investing” as “putting (money) into businesses, bonds, etc., for a profit.” Webster’s Dictionary defines “Gamble” as “1. gambling for money, etc. 2. Taking a chance for an advantageous position.” By comparing the definitions of “Investing” with “Gambling”, one can determine that if you invest, you are putting money into stocks (businesses) or bonds or bank certificates of deposit for a profit. If you “bet” (play craps), you are placing money (a bet) on a part of the craps table layout to win money. Depending on how you invest and how you bet, playing craps determines whether you will have a better chance of winning money or losing it.
If you listen to financial radio talk show hosts and their guests and watch finance-based television shows (CNBC), as well as read investing magazines and publications, you’ll notice investment philosophies similar to those we suggest for playing craps. . Some of the comparisons are as follows:
1. “Investing always involves risk.” – – Don McDonald, nationally syndicated talk show host, 1/24/01. Money Talk’s Bob Brinker has also said something similar.
Translation: Playing dice always involves risk.
2. An American Century ad in Smart Money Magazine, January 2001, page 58, reads in part as follows:
“Knowing that teamwork and a disciplined approach can deliver strong long-term results.” See also, Money Magazine, December 2000, page 30.
Translation: Playing dice with a disciplined approach can deliver solid results in the long run.
3. TD Ameritrade in its Option Investor Disclosure (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 substantial and potentially rapid losses.
Translation: Playing craps is not suitable for everyone. Playing craps can expose people to potentially rapid and substantial losses.
If you apply sound investment techniques and trading principles to playing craps, you should be able to minimize your losses and maximize your gains (profits). Just remember: just as there is no foolproof strategy for investing, there is no foolproof strategy for playing craps.