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06-18-2012, 10:00 PM
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#1 |
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 Difference between Investing and Gambling?
Assalaamu Alaaykum,
The other day I was talking to a Muslim friend and he mentioned to me that he had invested a large sum of money into a new company that was being formed 5 years ago. He wasn’t the only investor there are about 15-20 more shareholders, Muslim and some non-Muslims, who had invested. 5 years later – the company is either going to declare bankruptcy or merge with another company but they will probably lose around 70% of their share value. To make a long story short, obviously is saddened over the ordeal but there isn’t much that he can do about and he is also employed at this company as a manager. He asked me, “I’ve been thinking, I invested this large sum of money and I am losing it, what is the difference between investing and gambling? What is the difference if I played the lottery or went to the casino and gambled it away, at the end I don’t know what is going to happen? I feel like I gambled.” At the time, what he said made sense to me but, however, I knew that there was a difference between the two but I wasn’t able to articulate a reply. I know that there is uncertainty in everything that we do, i.e, getting married, going to college, moving, etc. I would like to know for future instances. 1.What is the difference? 2. How could I have better explained the two? 3. If investing in a company is not haram, then how does investing differ from betting on sporting matches? For example if you do your research, etc. does this make it haram? |
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06-18-2012, 10:19 PM
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#2 |
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Asalaam
Well there is a difference between speculating and investing, just like opening a business, investing on the market the business may do good or bad, the investing is all based on facts and figures plus external factors. If he was speculating then there is no difference compared to gambling. Wasalaam |
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06-18-2012, 11:22 PM
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#3 |
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If am approached by a friend, who has been in the computer industry for 25 years and has had previous success, wants to start up a new business. Off the top of my head, he wants to start up a computer memory manufacture.
He explains to me that from his research, there a 2-3 major manufactures and a number of smaller ones. During his pitch, he explains that our quality will be USA made, and the technology will be equal to or greater than the major brands. He explains what the market is like and gives a projection of how much market share we will be able to capture within a couple of years. Who are distributing partners will be etc. As a laymen, I have to go by what he is saying. He has the expertise, he knows the market better than I do. There is no way for me to determine the market. It is not as simple as going to Yahoo Finance and looking it up. So my judgement to invest is by what he says. I don't have contacts in the industry to verify. Doing so does this make it gambling? |
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06-19-2012, 02:04 AM
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#4 |
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Investing and gambling are similar to each other. Actually, betting is closer to investing. They both carry and element of risk, for a potential pay off. At one level, investing is a Halaal method of risking your capital for a payoff, since Allaah says so. Just like the fact that one may be intimate with a member of the opposite gender in several ways, but only the method which includes uttering a few words (eejaab, qabool) and handing over a little cash (mahr) is Halaal. Why aren't other ways Halaal? Allaah says so
 Obviously, there are wisdoms behind why investing is Halaal and gambling is not, and why marriage is Halaal and Zinaa is not. I'll leave that for others to contribute. I will say this though, with an elaborate enough analysis, one could probably equate investing with speculation or gambling (with the difference being less of principle, and more of degree - of risk etc ..), but none of that matters. In the eyes of Allaah, the means by which one attains something matters, and the letter of the law matters. In summary, your life will be much simpler if you adopt the following in matters of faith: Pork is Haraam, cuz it's Haraam - even if it's tasty and is the cure to cancer .
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06-19-2012, 02:17 AM
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#5 |
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There is a huge difference between gambling and investing. Gambling involves making money with money - there is no product in between, take for example lottos, casinos, slot machines, etc. However, investing is for making a product and selling it for a profit(loss) thus generating a positive or a negative returns.
Speculation is similar to investment but there are many negative connotations involved such as bidding a price of commodities to a level that is unsustainable in the long term. One very good example is the speculation of buying crude and gold and parking them in a tanker or bunker somewhere, thus driving the prices to a high level that is unlikely to be sustainable in a long term. In a speculation cycle market entry and exit is very important. |
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06-19-2012, 08:36 PM
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#6 |
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Vagabond made an interesting point and I failed to mention this in my previous post, regarding betting. Would betting be considered a type of investing? Take for example the Euro 12'. If an individual took the time and compared the teams, analyzed the statistics and came to an educated conclusion that a certain team will win by X number of goals.
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06-19-2012, 09:06 PM
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#7 |
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Vagabond made an interesting point and I failed to mention this in my previous post, regarding betting. Would betting be considered a type of investing? Take for example the Euro 12'. If an individual took the time and compared the teams, analyzed the statistics and came to an educated conclusion that a certain team will win by X number of goals.  Betting/Gambling is haram, because the profit/loss earned is without any effort. Investing is halal, because the profit/loss earned is with effort |
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06-20-2012, 12:17 AM
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#8 |
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OR What if one invests in something, and little to no effort is exerted (happens all the time). Forget about the reasons people. Worry about establishing whether or not something is ordained by Allaah and His Messenger. If you are convinced that something is ordained or forbidden by Allaah and His Messenger - what's the point going further? Is that thing not worthy of being followed if it has no reason, or the reason doesn't make sense to you ? Figure out the answer to this question, then revisit the original question. Life is simpler this way. |
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06-21-2012, 09:16 PM
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#9 |
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What if there is a lot of effort and study in betting/gambling (there can be, and there is). For gambling, I think someone can make a strong argument. Betting can make it into a gray area. As people do with Hijab, interest, etc. |
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06-21-2012, 10:25 PM
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#10 |
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Vagabond, I 100% agree with what you are saying. I want to have a response to the people that say, "What If orWhat is the difference". A response for the people who say that there is no difference. The difference is with betting you don't actually own anything, with investing you invest in an assett which is why speculation is more akin to gambling because of ownership with some people especially day traders sometimes holding a stock for a couple of hours or minutes, they can not take full ownership or invest in a couple of hours or minutes. |
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