Investor and Gambler

Ariffmahmood in his/her blog (www.bizliner.net/finance/?p=10) discussed about active and passive income with relative to Robert Kiyosaki famous Casflow Quadrant.

The author mentioned that to become rich, it is necessary to switch from an active income earner to a passive income earner.  And one way is to become an investor as in the I quadrant of the Cashflow Quadrant.

The author then questioned the difference between an investor and a gambler.

In my opinion, I see that the primary difference between an investor and a gambler is the way they handle the investment risk.  I am assuming the definition of a gambler in the author mind is a person who is trying to earn money by investing money.   

Both are trying to make money work for them.  They invest to earn more money.  An investor becomes a gambler when he invests money into opportunities, without considering and often ignorant of the risk involved.  They are often blinded by their greed and do not make any sound judgement, either because they do not have the adequate knowledge or they are just too laziness to do so.  Sometimes, they are just too arrogance and think they know everything, as was mentioned by Robert Kiyosaki in the “Rich Dad, Poor Dad” book. 

For a gambler, the success or failure of his investments is based on luck and blind faith.  And as in line with the Chinese sayings: “Gamble 10 times and you will lose 9 times”, a gambler will most of the time fail in his investments.

For an investor, the decision to go or not to go with an investment is based on sound analysis of the opportunity based on adequate and timely information and knowledge, and the management of the risk that comes with the opportunity.  It is mostly made based on facts, information and figures rather than “personal feel”.  Therefore, the chance of the investment successing is comparatively higher.

The difference between an investor and a gambler is therefore, the way they approach the investment.