Sports betting apps now allow millions of Americans to put down serious money on the outcomes of games, and on in-game events such as a specific team scoring first, all from the comfort of their smartphones.
According to Goldman Sachs Research, U.S. sports betting has grown into a $10 billion industry since a 2018 Supreme Court decision allowed states to legalize it — and it could grow into a $45 billion industry in the years ahead .
That growth is apparent in the stock prices of sports betting companies such as DraftKings (DKNG). DraftKings shares have more than doubled in price since the company went public in 2020, albeit with significant volatility since then.
Buying shares of companies that operate in the sports betting industry (like DraftKings) may add some volatility to your portfolio, but it’s still an investment in a traditional asset. So how does that stack up with sports betting itself?
The difference between betting and investing
According to Chris Woods, a Charlotte, North Carolina-based certified financial planner, one of the biggest differences between an investing habit and a sports betting habit is long-term outcomes.
“You’re going to end up with a lot more money over the course of 10 or 20 years in the market, with consistent investing, than you would with the win-some-lose-some approach of betting on sports on a weekly or monthly basis,” Woods says.
For reference, the average total return of the S&P 500 index over the last few decades is about 10% per year, or roughly 159% per decade, before inflation. That’s a level of consistency in returns that would be hard to match with any kind of betting.
However, Woods notes that there’s another difference between sports betting and investing, which helps explain the former’s popularity: a lot of people know more about sports than the stock market.
This way, they know exactly how much they are allocating to sports betting and can ensure it doesn’t interfere with their essential expenses or long-term financial goals,” Woods says.
Both experts also recommend seeking help if sports betting starts to negatively impact your finances or overall well-being.
“If you find yourself doing it more often than you should, or if you’re finding that it’s become a problem in your relationships or you’re not able to pay your bills because of it, that’s a sign that you need help,” Paré says.
In summary, while sports betting can be a fun and entertaining activity for some, it’s crucial to approach it responsibly and be mindful of its potential impact on your financial health. Setting limits, avoiding betting with money you can’t afford to lose, and seeking help if needed are all important steps in ensuring that sports betting remains a recreational activity rather than a financial burden.
When it comes to sports betting, treat it like any other form of entertainment. Allocate a specific budget for it just like you would for going to the movies or concerts. Consider it as an expense and include it in your entertainment budget. However, it’s important to be mindful of the risks involved in sports betting. For some people, it can lead to gambling addiction.
If you feel that your sports betting habits are becoming problematic, reach out for help. The National Council on Problem Gambling runs the National Problem Gambling Helpline, which you can contact at 1-800-GAMBLER (1-800-426-2537). They also provide assistance through text and chat on their website.
Setting healthy limits for yourself is crucial. A financial advisor can help you determine a responsible budget for entertainment expenses, including sports betting. Remember to gamble responsibly and seek help if needed.
Disclaimer: The author and editor do not have any investments in the mentioned activities at the time of writing.
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