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 dice 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 the expectation of a lower return. Similarly, some craps bets have a higher risk factor with a higher payoff reward, while other craps bets have a lower risk factor with a lower payoff reward rate.
There are many similarities between various types of investing in stocks and playing dice. For example, investing in stock options is extremely risky compared to investing in conservative dividend-paying stocks 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 a 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 a 12, which will give you the highest profit (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 winnings, but also a lower risk of losing. Similar to 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., for the purpose of making 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 to make a profit. If you “bet” (play dice), you are putting 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 have a higher chance of winning money or a higher chance of losing your money.
If you listen to financial talk radio hosts and their guests and watch funded television shows (CNBC), as well as read investment magazines and publications, you will notice similar philosophies for investing to the ones we suggest for playing dice. Some of the comparisons are as follows:
1. “Investing always involves risks.” – – Don McDonald, host of nationally syndicated talk show, 1/24/01. Bob Brinker of Money Talk has also said something about the same effect.
Translation: Playing dice always involves risks.
2. An American Century ad in Smart Money Magazine, January 2001, page 58, reads in part as follows:
“It’s 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 strong long-term results.
3. TD Ameritrade, in its options disclosure to 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 potentially rapid and substantial losses.
Translation: Playing dice is not suitable for everyone. Playing dice can expose people to potentially rapid and substantial losses.
By applying sound trading principles and investment techniques to craps, you should be able to minimize your losses and maximize your gains (profits). Just remember: since there is no foolproof strategy for investing, there is no foolproof strategy for playing craps.