From cryptocurrency and meme stocks to online trading platforms and the latest investment trend on social media, there has never been more opportunity to put money behind a prediction about what might happen next.
One of the latest examples is the rise of prediction markets.
These online platforms allow users to put money on the outcome of future events, ranging from economic announcements and movements in oil prices to elections, sporting results and popular culture.
Their growing international popularity has attracted the attention of Australia’s corporate regulator. ASIC has warned Australians about the risks associated with offshore prediction markets, with no prediction market operators currently licensed as financial markets in Australia.
While prediction markets are a relatively new example, they raise a much older financial question: when does investing become speculation?
“Putting money at risk does not automatically make something an investment,” says Jordan Kitto, Financial Adviser at Halpin Wealth.
“A good investment decision should start with understanding what you are buying, why you own it and how it supports your longer-term financial goals.”
What are prediction markets?
Prediction markets generally allow people to buy contracts linked to simple yes-or-no outcomes.
For example, a market might ask whether interest rates will rise at the next RBA meeting, whether a commodity will reach a particular price or whether a certain event will occur by a particular date.
The value of the contract changes as participants reassess the probability of that outcome.
While the format can resemble financial trading, ASIC has described prediction markets as being, in practical terms, akin to gambling.
Moneysmart warns that Australians using offshore operators may also miss out on consumer protections that would normally apply when dealing with regulated Australian financial services providers.
For Jordan, the bigger lesson extends well beyond prediction markets.
“The important question is whether you are investing in an asset with a long-term purpose or simply betting that you can correctly predict what happens next,” he says.
“That distinction can become blurred, particularly when something is presented using the language and technology of investing.”
Investing and speculation are not the same thing
All investing involves uncertainty. Share prices fall. Property markets move. Interest rates change. Businesses sometimes underperform.
Risk itself is therefore not what separates investing from speculation.
A considered investment strategy will generally involve buying assets because you expect them to produce income, increase in value over time or perform a particular role within a diversified portfolio.
The decision is usually connected to a longer-term objective such as building wealth, funding retirement or generating income.
“The investment decisions we make with clients are not based on needing to correctly guess what markets will do next week or next month,” Jordan says.
“We are looking at the client’s timeframe, the level of risk they can comfortably take and the mix of assets that gives them the best chance of achieving their goals over time.”
Be wary of financial FOMO
The temptation to speculate can become particularly strong when an opportunity appears to be making money for everyone else.
Social media can amplify this. A rapidly rising asset, screenshots of large profits or an influencer talking enthusiastically about an opportunity can create a powerful sense that you are missing out.
ASIC has repeatedly warned about the growing influence of financial content on social media and the risks of acting on information from unlicensed finfluencers. The regulator notes that social media algorithms are designed to generate engagement, not necessarily to provide balanced or accurate financial information.
“The fear of missing out can encourage people to make decisions they would never normally make with their money,” Jordan says.
“It is worth asking whether you genuinely understand the opportunity or whether you are reacting to the fact that everyone seems to be talking about it.”
An investment being popular, innovative or rapidly increasing in price does not necessarily make it appropriate for you.
Understand what you actually own
Before committing money, you should be able to explain in relatively simple terms what you are buying.
- With shares, for example, you are buying an ownership interest in a company.
- With a diversified investment fund, your money may be spread across many different companies, industries, countries or asset classes.
- With property, you own a physical asset that may produce rental income and potentially increase in value.
With some highly speculative products, however, there may be no underlying income-producing asset at all. The outcome may depend almost entirely on another person being willing to pay more, a short-term price movement or a particular event occurring.
Jordan suggests asking:
- What do I actually own?
- How is a return generated?
- What could cause me to lose money?
- Could I lose my entire investment?
- How easily can I access my money?
- Is the provider appropriately licensed?
- How does this fit with the rest of my investments?
- What role does it play in achieving my financial goals?
“If you cannot clearly explain how an investment works and where the return is expected to come from, that is usually a sign to slow down,” Jordan says.
“Complexity does not automatically mean sophistication.”
Higher potential returns usually mean higher risk
Generally, investments offering greater potential returns also expose investors to greater uncertainty or the possibility of larger losses.
This is particularly important when an opportunity is promoted as easy money, guaranteed income or a low-risk way to generate unusually high returns.
ASIC has also increased its focus on online investment promotions and scams that use social media, artificial intelligence and fake endorsements to encourage Australians to act quickly.
A sense of urgency should therefore be treated with caution.
A sound financial strategy rarely requires you to make an immediate decision simply because an opportunity might disappear.
Diversification still matters
One of the fundamental differences between long-term investing and betting on a particular outcome is diversification.
Rather than depending on one company, sector, property or prediction being correct, a diversified portfolio spreads money across different investments.
This does not eliminate risk, but it can reduce the impact that one poor-performing investment has on your overall financial position.
“At Halpin, we spend a lot of time thinking about how the different pieces of a client’s portfolio work together,” Jordan says.
“One investment might provide growth, another income and another greater stability. The strength comes from the overall strategy rather than finding one investment that we expect to outperform everything else.”
This approach can seem less exciting than chasing the latest market trend.
That is not necessarily a bad thing.
You do not have to avoid every speculative opportunity
Some people may choose to allocate a small amount of money towards a higher-risk investment because they find it interesting and understand they could lose it.
The important distinction is recognising it for what it is.
Money required for retirement, a house deposit, children’s education or other important goals should not generally depend on a speculative outcome.
“If someone wants to take a small amount of money they can genuinely afford to lose and speculate, that is very different from putting an important part of their wealth at risk,” Jordan says.
“The key is making sure it does not derail the financial plan if things do not go as hoped.”
Take a moment before following the hype
When a new investment opportunity appears, there is rarely any harm in slowing down.
Consider what you are buying, the risks involved, whether the provider is appropriately licensed and how the decision fits within your existing portfolio.
Most importantly, ask whether you are investing towards a goal or simply hoping to correctly predict what happens next.
That one question can tell you a great deal about the decision you are about to make.
Source: This article was inspired by “Prediction markets ‘akin to gambling’, corporate regulator warns”, written by Myles Houlbrook-Walk and published by ABC News on 4 August 2026. Additional information has been sourced from ASIC’s Moneysmart guidance on prediction markets.
Build your wealth with a strategy, not a bet
Successful investing is less about chasing the next opportunity and more about making considered decisions that support your long-term goals. Halpin Wealth can help you understand the risks within your portfolio, assess new investment opportunities and build a diversified strategy suited to your circumstances and timeframe.
If you are unsure whether an opportunity belongs in your financial plan, speak with our team before putting your money at risk.
This information provided in this article is general advice only and has been prepared without taking into account your own objectives, financial situation or needs. Before making a financial decision based on this advice, you must consider whether it is appropriate in light of your own needs, objectives, and financial circumstances, and where relevant, obtain personal financial, taxation or legal advice. Where a financial product has been mentioned, you should obtain and read a copy of the Product Disclosure Statement (PDS) prior to making any decisions about whether to acquire a product.