Gambling At Different Income Levels

Everybody is trying to get more money, keep more of the money they have, and, at the very least, pile a little up for retirement. But lower income, middle income, and upper-income groups have a different approach to multiply their money. Casino patrons visit in order to quickly turn a tiny amount of money into a large amount of money. People from every economic level visit casinos, for most people it is short-lived entertainment. When it comes to getting more serious about an ongoing way to make a little money into a lot of money, most people do their gambling in three other arenas.

You want the big money right now, so why wait? Buy a lottery ticket today and find out the result tonight. This is the first gambling arena that people frequent to try to end their money troubles. People earning under $100,000 are 2.5 times more likely to frequently buy lottery tickets as people that earn more than $100,000. No big surprise here, middle to low-income earners find lottery tickets a cheap and easy way to hit big money on the way home from work. This is not a form of gambling that I would recommend as your chances of winning have been equated to being struck by lightning 25 times.

Only half of the American population has ever tried their hand at the next gambling arena: the stock market or mutual funds. You might have a retirement account with a couple mutual funds, or you could be trading in and out of stocks every few days. But this is where middle-income earners go to gamble and try to get rich. The average stock portfolio is a whopping $34,300. Any stockbroker will tell you that if you are lucky and have 40 years, you may be able to own a portfolio worth a million dollars. When there is a sharp increase in the stock market, the amateurs rush in and try to make it a profession; but get financially hurt in the end. In the late 1990s, it was day-trading. I personally know successful short-term traders, but 97% of them quit after losing most/all of their trading account in a short amount of time.

People in the high-income bracket have two gambling arenas that they employ to get richer: real estate and private placement memorandums. The beauty of investment in real estate is that it can lower your taxes by taking a deduction for depreciation. This feature is not available to lottery tickets, slot machines, or mutual funds. In this gambling arena, there is land development, residential rentals, apartments, and commercial property of various types. The high-income earners buy properties with a high monthly income, reduce their taxes with its depreciation, and hope for a large rise in the property value over time. But as I said before, when there is a price run-up, the amateurs rush in and ultimately get financially hurt. In 2002-2005, the rage caught on in preconstruction condominiums (the cheapest way to get into real estate). The term flipping condos became prevalent and masses of beginning investors have lost a lot of money because they weren’t educated about real estate investing. But professionals in the industry continue to earn money because they buy based upon monthly income, and speculative gains are just the extra icing for the investment.

The second casino that high-income earners use is PPMs (private placement memorandums). These are investments that require the investor to earning over $200,000 yearly or have a net worth over $1 million. The government only wants sophisticated investors who can afford to lose their money entering these unregulated investments. These investments are normally created by small business owners that need more money to expand, so they are offering part of the ownership of their company with a higher than average rate of return. Conservative real estate offers the best odds of success for any of the gambling arenas; and then when you have built up enough money, you can begin with some conservative PPMs.

Where do you want to focus your getting richer effort? There is no risk-free path to follow, but maybe this will help you decide: What is the probability that you will successfully pick the winning lottery numbers today? The joke you’ll hear is that losing money on lottery tickets is a tax on the mathematically challenged. What is the probability that you’ll buy the stock of a runaway company? What is the probability that you can find a valuable real estate transaction?

There is one additional popular gambling arena available to people with internet/computer/technical skills, and that is joining a start-up company that is eventually taken public. The odds of success are only 7 times better than the lottery, about 1 in 6 million.

 

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