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 a higher return, while other stocks have a lower risk factor but also with a lower return expectation. Similarly, some craps bets have a higher risk factor with a higher payout, while other craps bets have a lower risk factor with a lower rate for the payout.
There are many similarities between various types of stock investments and playing craps. For example, investing in stock options is extremely risky compared to investing in conservative stocks that pay dividends, such as Disney, Coca Cola or MacDonald’s. Stock options will allow you to make big profits, but with a lot of risk. Investing in conservative companies will have lower risk, but will give you much lower returns. 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 payout (pays 30 to 1), but also has the highest risk of losing (less than 3% chance of winning). Or you can bet on 6’s and 8’s, which have lower win payouts, but also a lower risk of losing. Just like investing in stocks, a craps player will have the opportunity 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., to make a profit.” Webster’s Dictionary defines “Gamble” as “1. to play games of chance for money, etc. 2. to take a risk 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 putting money (a bet) on a portion of the craps table layout to win money. Depending on how you invest and how you bet, playing craps determines whether you have a better chance of winning money or losing it.
If you listen to finance radio talk show hosts and their guests and watch finance-based TV shows (CNBC), as well as reading investment magazines and publications, you will 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. Bob Brinker of Money Talk has also said something similar.
Translation: Playing dice always involves risk.
2. An advertisement for American Century 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 craps with a disciplined approach can deliver solid long-term results.
3. TD Ameritrade in its Disclosure to Options Investors (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 quick and substantial losses.
By applying sound investment techniques and trading principles to playing craps, you should be able to minimize your losses and maximize your profits (profits). Just remember: just as there is no foolproof strategy for investing, there is no foolproof strategy for playing craps.