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Investment Ethics Essay

The contemporary world of today functions on investment. There are many types of investment such as investment in property, shares, mutual funds, sugar, gold, oil, rice etcetera (Theodore , 1992). The list goes on and on with some forms of investment so inanely mundane like investment in over priced paintings by unknown artists that one is forced to shake their heads at the inanes of how far the concept of investment has come since its inception. Investment is described in dictionary as:

“In finance, investment is 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. In business it is the purchase by a producer of a physical good, such as durable equipment or inventory, in the hope of improving future business. ” Gambling on the other hand is almost as old as investment itself and its exact origins are unknown. Scientists believe that the ancient Romans would bet on the outcomes of chariot races and gladiator fights.

It could be defined as: “…the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. Typically, the outcome of the wager is evident within a short period (Linda , 2006). ” Now, a raging debate in the world today is whether investment is or is not just another form of gambling. I am an opponent of this statement but will first give an argument in favor of the statement.

The purpose of me including the definitions above was to prove that even the meaning of the words investment and gambling themselves are similar. Any kind of investment be it financial or physical, is done to gain money or to increase the investors’ wealth. Gambling also serves the same purpose which is to gain financially from an act (though some people gamble for the thrill of winning etc). Also, in money investment, finance managers everyday gamble outrageous amounts of other peoples’ money on chance. Such transactions entail high risks and if this is not a form of gambling then what is?

In fact, in some religions like Islam, most forms of investment except investment in property and currency, is forbidden because they proclaim it to be gambling which is also forbidden in the religion. In that way, if for people of some faiths it is forbidden completely, then it is wrong from an ethical perspective because you are risking not only your own earnings but the money of those who have entrusted you with their wealth (like shareholders to security companies). In addition, it is wrong from a moral point of view. This is because gambling gives rise to selfishness in the human heart.

Greed is a natural emotion for almost all people and investing money in the form of higher returns gives birth to insatiability for more money which is why we often see people at casinos squander all their gambling winnings in hope of winning more and more. It is selfish because gamblers profit on the wealth of others and do not care about the next person or what big a loss he suffers. Another way that gambling can be wrong is that it may make people idle and complacent. They may be happy to earn their money through gambling only.

They may not work hard because of this for a living because of this and continue to live off gambling without caring that it is not a permanent or very stable source of income (Elizabeth , 2007). But even though their definitions may be partly similar, the two words are not common in their truest sense. I agree that investment puts peoples’ money at risk for chance of a higher return but it is done by professionals like investment managers and financial accountants instead of novices or any Tom, Dick and Harry trying out their luck like in gambling.

It is a whole structured business activity with companies spending months deciding how to spend their customer’s capital and hedging (or insulating) the investment against any negative exchange rate or interest movement. Gambling on the other hand requires no such months of planning and development and can be done on the spot. Secondly, gambling involves one party losing and the other winning. The winning of one depends on the other’s loss. In investment, there is no such tradeoff and all investors can benefit at the same time. Another very valid point here is that gamblers often don’t have the same intensive information that investors have.

In the long term, gamblers are always paid less in winnings then they have invested. That is not the case with investment. So the debate between whether gambling and investment continues unresolved with both sides vehemently arguing their point. Works Cited Theodore, V. Ethics in Investment Profession. Research Foundation of the Institute of Chart. (May 1992). Linda, K. T. Managing Business Ethics. Wiley. (Aug 2006). Elizabeth, A. C. The Psychology of Ethics In finance and Investment. Research Foundation of CFA Institute. (June 2007).

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