Bruce Dias 
While sports betting and investing are considered separate entities, there remains considerable crossover between these two practices.
To understand this further, we need to consider the concept of trading derivatives, such as forex. After all, this is a highly speculative investment vehicle and one that’s focused on achieving short-term gains without assuming ownership of the underlying financial instruments, mirroring some of the core elements of sports betting. Then there’s the practice of spread betting, which is relevant to both marketplaces and blurs the lines between investing and wagering even further.
In this post, we’re going to consider the core differences between investing and sports betting, while asking why diversification remains a key dividing line.
Key Differences Between Investing & Sports Betting
Ultimately, investing and gambling both involve risking capital in the pursuit of a potential return, but there remain some fundamental differences between targeting the financial markets and engaging in off or online sports betting. Here’s a more detailed explanation of these differences and why they’re important.
• Chance, Skill and Risk Management
When you decide to bet on sports online, you’re largely wagering on outcomes that are random and influenced by a number of conditions and in-game factors.
This means that risk management focuses primarily on managing your bankroll efficiently and regulating individual stake amounts, so that the value of your bet is commensurate with the implied probability of an outcome occurring, the published odds and potential returns.
Conversely, investment markets tend to be far more deterministic, which means that outcomes and trends tend to be driven by an underlying set of rules and principles. What’s more, historic and real-time data can be utilised more effectively in the financial marketplace, making it much easier to predict price shifts and minimise the risk of loss.
• Cash Out vs Stop Losses
It can be argued that ‘cash out features’ and ‘stop losses’ are comparable risk management tools for gamblers and investors respectively, but these tools vary significantly in terms of the level of control that they afford individuals.
For example, while cash out offers and terms vary from one sports betting site to another, they are relatively restrictive and laid out with complete autonomy by the sportsbook. So, although some operators may allow you to cash out slightly later than others and increase your chances of minimising loss during live sports betting, there remain stringent T&C’s that are outside of your control.
Conversely, stop losses are managed directly by investors, who can set precise limits at which positions are automatically closed to help curtail losses. Similarly, take profit orders help you to close positions once a desired return has been achieved, while you can tailor your thresholds to suit the prevailing market conditions in real-time.
• Timeframes and Short vs Long-term Outlooks
Another crucial difference between UK sports betting and investing is the outlook of respective participants.
For example, gamblers regularly place individual bets that either succeed or fail within a relatively short period of time. This is especially true in the case of so-called micro bets, which are focused on seemingly small and insignificant in-game events and are usually settled within moments.
Match bets are also determined within a finite period of time, while even outright wagers (which are settled once a particular tournament or competition has been won) will operate within a restricted window. Because of such timeframes, sports bettors may place high-volume bets within a specified period, whereas investors may be a little less active.
There’s some crossover here, of course, as speculative traders may use scalping or day trading strategies to achieve incremental profits from a high volume of orders. In the case of buy-and-hold investments, like dividend stocks and similar equities, however, you’ll seek out yields over a much longer period of time.
Focus: Long-Term vs. Short-Term
Despite this crossover, we can broadly state that most sports bettors retain a relatively short-term outlook that’s focused on earning incremental returns from a high volume of wagers within a fixed timeframe (depending on how they manage their bankroll).
Conversely, most investment portfolios are dominated by stocks and bonds, which are treated as relatively reliable asset classes that can be bought and held as they appreciate in value.
Bonds issued by governments and corporations are particularly trusted by investors, while they deliver periodical dividends that provide a viable source of income over many years.
Using Diversification as a Dividing Line
Of course, many will argue that these variable outlooks cannot be used to distinguish clearly between sports betting and investing, due to the rising popularity of speculative retail trading, spread betting and strategies, such as scalping.
However, one clear dividing line that remains applicable is the practice of diversification. After all, while this is a key rule of investment that can help to minimise exposure to loss and market risk, it offers nowhere near the same protection in the case of sports betting.
In fact, the principle of diversification can have a negative impact on sports betting outcomes, as it may require you to wager on sports or events that you have little knowledge of and negate any competitive advantages you may have.
Summary
While there are many things that bind sports betting and investing (especially when you factor in speculative asset classes and derivatives), these practices are also different in a number of different ways.
However, it appears as though diversification remains the most obvious dividing line between sports betting and investing, with this potentially detrimental to the former practice and highly advantageous when navigating in the financial markets.
