Ask Matt: How is Wall Street different than Las Vegas?

— -- Q: What is the difference between gambling and investing?

A: Is Wall Street really any different than Las Vegas?

Investors beaten up by a nasty stock market over the past 10 years understandably are frustrated by the stock market. And investing, to some, might seem little better than gambling.

Gamblers who blow through their chips end up pushing their seats away from the casino table in frustration. Similarly, instead of being a place to invest in companies and profit from growth, stocks have delivered lackluster returns for many investors. Furthermore, major stock market sell-offs and malfunctions, including the "Flash Crash" of 2010, have undermined faith in the system.

Even investors who set up diversified portfolios for the long term, more than 10 years ago, have watched as stocks soared and crashed and only ended up with subpar returns to show for their heartache. And the Wilshire 5000 index is still 10% below its record high on Oct. 9, 2007. You can see why some investors might think they would have been better off just running to Las Vegas.

But is it accurate to say that investing is just another form of gambling? It all depends on how you define investing.

If investing to you is short-term speculation on moves by stocks or stock market indexes, then yes, it's gambling. No investor can know with absolute certainty (legally, at least) what stocks are going to do the next second, minute or hour. Trying to jump in an out of stocks hoping to take advantage of short-term moves requires traders to time and guess. Short-term speculation is a form of gambling. It's taking a chance on essentially random events, which is the direction of stocks in the short term. Short-term investing in fact is better described as trading, which is a short-term game.

Longer-term investing, though, is a much different story. Investors who buy assets, or diversified baskets of investments including U.S. stocks, foreign stocks and bonds, and hold for the long term aren't solely playing a guessing game. They instead are buying a stake in assets that they believe will increase in value over time. They're not trying to take advantage of short-term gyrations but instead, act as owners in a business.

Critics might say that long-term investors can, and have, lost money, as traders routinely do. And that's certainly true. There's no guarantee that a long-term investor will necessarily make money. But making money isn't what separates investing from gambling.

If a blackjack player doubles his money at the table, that doesn't make it any less of a case of gambling. Similarly, if an investor prudently builds a portfolio, and it doesn't work out, that just means the investment didn't pan out. The fact is that the long-term investor was acting like an owner and bought a piece of a company.

It is true that randomness plays a part even with long-term investing. Long-term investors are subject to risks the economy may falter or that there might be financial disruptions. But long-term investors aren't trying to game the market. They're looking to own pieces of companies to enjoy a slice of their profits.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz