While most of the products and services provided by companies worldwide are cyclical in nature, there are very few consumer sectors that provide investment opportunity no matter what business cycle the economy is in. One such industry is gambling. Irrespective of the economic condition, there is always footfall in a casino or a betting hall. In order to diversify a portfolio, gaming is one of the interesting sectors to be invested in. The industry itself has a strong lobby which would not let it fall. One need not apply for a gaming licence or invest in a casino to raise a bet for this sector. Bond market and stock markets provide various options to gain exposure to gaming business.
Before venturing into investing, let's learn few basic things about the industry. Gaming involves a host of betting activities such as betting on races and sports events, casinos, poker, and slot machines. These companies can be one of the two types: American-styled gaming which is modelled after the destination based gambling and European-styled gaming which consists of retail betting shops. With the advent of internet a third type of gaming companies have emerged which focus only online gaming. This involves both the suppliers of software and operating platform and host gambling companies which provide gaming products to customers online.
Historically, all forms of gaming activities were considered illegal. Many illegal operators existed on regional level due to existence of strong demand for the sector. This led to change in the perception of gambling activities and governments across world legitimised gambling labelling it to be leisure or recreational activity. This resulted in widespread development of casinos (mainly in US) and betting shops (in Europe). With the changing times, new products were added such as slot machines, off course betting, telephone betting and ultimately to online betting. While most of the countries are which allow gambling are silent on online gambling, European countries have been the pioneers in the field. In 2000s, UK followed by Italy and Spain legalised online gaming, giving way for new kind of players in the markets.
Though highly regulated, both land-based gambling and online gambling have turned into lucrative business. Investors will to enter gaming sector could invest in some of the companies which have their shares listed in stock exchanges for instance William Hill. Also, few of the gaming companies have bonds outstanding, giving good opportunities for fixed income investors to gain exposure to this sector. However, the sector is highly regulated, exposed to technological changes and has high operational gearing. Investors are advised to hire financial advisors who will be able to access these risks associated with the bond, match it with risk appetite of clients and provide recommendations for investments.
Chirag Sharma is Digital Marketing Consultant in SJ Seymour group headquartered in Hong Kong. SJS Markets provides research, advisory, execution services and private wealth management solutions.
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