Advanced Personal Finance

The NFL season starts this Thursday.  Before you non-sports-fans ignore the rest of this post, just hear me out.  I’m going somewhere with this.

Let me say right off the bat, I don’t know jack about football.  At work, I’m sarcastically known as ‘the sports guy.’  I couldn’t tell you if Terrell Owens is a kicker or a quarterback.  I don’t care.  I’m interested in the NFL for a very different reason.

It’s not much of a secret that many people gamble on the NFL.  And that fact got me thinking that sports gambling is a type of investing.  Seriously.

Think about it.  What’s the definition of ‘investment?’  Here’s what Investorwords.com says and it’s a pretty good definition

In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use money in the hope of making more money.

So if I give money to a friend who’s particularly good at picking games, I’m doing so with the expectation of favorable future returns.  I’m using money in the hope of making more money.

Gambling is very commonly synonymous with speculation.  Now here’s the definition of speculation

Taking large risks, especially with respect to trying to predict the future; gambling, in the hopes of making quick, large gains.

Well I’m not taking large risks.  In this (purely fictitious, I assure you) scenario, I’m not hoping for quick, large gains.  I’m hoping for a return over the length of the season.  There is no large bet on any single game.  Bets are placed over a length of time (’investment horizon’) and spread among many games (’diversification’).

I think, then, that sports gambling can properly be labeled ‘investing’ when done in this way.  I’m not advocating gambling per se.  But sports gambling is as legitimate an investment as stock picking.

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This entry was posted on Wednesday, September 5th, 2007 at 4:33 pm and is filed under Investments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.