Financial StrategyInvesting

Should You Gamble With Your Money?

A couple of days ago, I heard one of the strangest ideas ever. I was talking with an old friend about business, and he said that he wanted to go and spend $5,000 on lottery tickets, and hopes to win big. He rationalized this by saying that it was for business investment, and “the stock market was no better”.

I asked him how he got this idea, and he responded, “I read online, does the founder of FedEx, Fred Smith, took $5,000 to Las Vegas, and turned it into $32,000.”

I looked into this online, and it turns out that this actually did happen. Fred Smith, the man worth 4 billion dollars, went gambling in Las Vegas to save his business.

When FedEx was a few years old, it was losing near a million dollars a year, and only had $5,000 left. This wasn’t enough to continue operating their planes, because fuel costs were more than this small amount. So, Fred Smith went to General Dynamics and ask for more funding, but was refused. Instead of shutting down the business and starting anew, he decided to go to Las Vegas to raise the money that he needed, and have the FedEx planes fly on the following Monday.

No, he didn’t go to Las Vegas for a fundraiser. He went to Las Vegas to go play blackjack with that $5,000, and astonishingly turned it into almost 30 grand.

Now, still in charge of FedEx, Fred Smith is worth billions, and FedEx makes hundreds of millions of dollars in Revenue a year.

This short story leads us to our big question: “Should you gamble with your money?” 

We all know the success stories of Powerball winners, and casino victors. Many of us are blinded by the bright lights and stacks of money, that we think our only attainable by gambling.

Well, I hate to burst your bubble, but this is absolutely the worst idea in the history of the world. Maybe in the universe, too. 

Look at people in the lines to the lotto, they are not smart, intelligent people. Nor are they rich. Rich people and smart people would be first in the line if the Lotto was a real wealth-building tool, but they are nowhere to be found. Why?

Because the lottery is a rip-off instituted by our, one and only, American government.

In both the lotto and casino gambling, the institution has a major mathematical advantage over the gambler. Odds are that in the long run, the gambler will lose, and lose big.

In the case of him calling the stock market worse than gambling, this could be no further from the truth. In the long run, if you gamble, you will come out with $0. If you invest smartly, you will come out with hundreds of thousands of dollars. even if you don’t invest smartly, only buying an index fund that tracks the S&P, you will have a return of 8% a year. That 8% builds up. That $0 from gambling does nothing.

In the case of Fred Smith, he was one lucky man out of millions of losers. The internet also fails to mention that his gambling winnings were not the sole cause of keeping the business afloat. It kept the company afloat for one extra day. After that day, Fred was able to secure 11 million dollars in funding. That was the actual thing that kept the business going. Not some crazy gambling winnings.

Instead of gambling, with whatever money you have I would advise that you build a business. Even with $1,000, you can make a profitable Drop Shipping business. I’ve done it myself.

You can also invest in this money. $5,000 will turn into $40,000 in 40 years, with you doing nothing. Gambling with $5,000 will leave you with $0 in 40 minutes.

Be smart.

 

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