Today may be one of the biggest days for gambling of the year, but I’m here to tell you why investing in S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) shares is not the same as gambling.
However, I can see why a lot of people confuse gambling and investing. One of the definitions of gambling is ‘a risky action undertaken with the hope of success.’ Choosing to invest in a business is certainly riskier than holding cash.
However, a gamble has a very high probability of your money going to $0. If you bet on the wrong horse your money is gone with no chance of return.
When you invest in shares there is of course a chance that the business could go bust.
However, many ASX 200 shares like Commonwealth Bank of Australia (ASX: CBA) and Wesfarmers Ltd (ASX: WES) have been around for many decades. They have been generating (and growing) cashflow and profit for many years.
Any share in the ASX 200 has been operating for a number of years. They clearly have a record of longevity.
If you think about a time horizon of 20 years or more I think the conversation should actually be that sticking with cash is the risk because of the high chance it won’t keep up with inflation.
It’s true that shares appear risky. When the share market falls 5% you see some great headlines like “Share market plunge wipes out $60 billion”. But, volatility is not the same as risk. I’m sure you won’t see a future headline: “Share market creates $200 billion over the past five years since that big crash”.
There’s certainly no thrill with investing for the long-term. You can’t make 200% or 1,000% in a few minutes. But you’re much more likely to come out on top when you put your money towards businesses that are likely to be much larger in a decade such as Challenger Ltd (ASX: CGF).
But, that doesn’t mean you need to ignore all the other fun stuff that comes with race day.
If you do want to call investing gambling, then this top share looks like one of the safest bets for market-beating growth.
You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!
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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.