Is Stock Investing Like Gambling?
Post on 20 August 2011 by Sleuk Finance
Buy and sell shares in the stock market, one says playing stocks, is not gambling. One thing in common is both do attempt to accurately predict future outcomes, but the similarities end there. In gambling, the outcome is determined by something over which you have no control and understand less, e.g. a pair of dice. This is not the case in the stock market. In the stock market, investment decisions are made after a careful analysis of the available information which you can find in disclosure documents.
For example, let us say you have in pocket $100.
You don’t have any real need for that money right now, and you sure wouldn’t mind trying to make that money work itself up to a bigger
sum. You could place a bet on the roulette wheel, in which case the fate of that $100 would depend entirely on your ability to predict random probability. Regardless of how much research you put into that prediction, the end result once the ball began to roll would be determined by nothing more than sheer chance. That’s pretty risky.
Investing in stocks works a differently. Once purchased, a stock represents a partnership between its issuing company and its investor. The investor has agreed to buy into the business and, in return, the issuing company has agreed to try to increase that amount by using it to
improve the business. You want the company to succeed; the company wants to succeed. Where is the gamble in that?
Choosing which partnership you want is also not gambling. The research involved here is not an attempt to understand a science like random probability; it is designed to increase familiarity with the company. Disclosed Information on the issuing companies is made available so
you can decide whether this is a company in which you would feel comfortable investing.
The fear that investing in the stock market is reliant on chance is proved wrong as new investors learn that the processes and tools with which they pick stocks are not based on random chance but on intelligent research and decision making.
I hope you understand the difference between investing in stock market and gambling. They are not the same.
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