Stock market compared to gambling?? Help?
During drops in the stock market some people have compared investing to gambling, saying it is no better than flipping a coin or playing a number on a roulette wheel. How is investing like and how is it different from gambling?
- DavidLv 78 years agoFavorite Answer
You cannot compare a child-like mindset of finger painting to a Renoir or Monet. There is no comparing a Ferarri to a Volkswagon even though they both have four wheels and a steering wheel. There is no comparing a race car driver to a teen driver, even though they may have the same intelligence and capability.
Gambling and luck are completely useless in preparation for life, comfort, peace, happiness, success and retirement. But it seems many people don't have proper goals any more than they have a proper trading plan, and insist on being gamblers wherever they go, whatever they do. You can gamble on anything.
Approached as a gambler with only chance and luck and a TV and a newspaper to guide him, trading or even “investing” is very similar to gambling or betting on a horse race.
But by the Trader's definition of trading, there is no comparison. Traders focus on risk control and money management. Gamblers rely on chance, roll the dice and hope. Traders are buying and selling an asset, gamblers hope on nothing.
Timing is critical to the Day Trader,. It's vital that he pay attention to multiple sources of information, sift through them, prioritize each separate piece, and make an astute decision once all information has been scrutinized, and depending on the time frame or volatility, this may need to be done every few seconds or minutes. You place your bet and hope with gambling, but this evaluation process goes on all day long with trading. Most beginners don’t realize that a trader focuses on risk. We manage and control risk; rather than traders, you could call us professional risk managers and be more accurate. By trading at support or resistance or a Fibonacci number or at a trend line or buy on a pullback, we have reduced our risk and tipped the odds in our favor. With gambling, you have no control over anything, and the house odds are always against you.
You can't be distracted and unfocused while formulating a trading plan or monitoring an ongoing trade. With gambling, you can do drugs and drink and entertain your woman and party at the same time, because there really is no intelligence being processed. Any idiot, whom has chosen to be ignorant, can be a gambler; no study required. Anyone who invests without first reading a few books is simply being foolish. But of course, the same gambler mentality people come here every day and ask “What is share market?”, “How do I invest?”, “”What is a good stock to buy right now,” like “What number do I put my money on?,” or “Which horse should I choose?”
We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved, like a gambler. We do not rely on luck.
Gambling is a type of entertainment. Nobody in their right mind will use gambling as a means to a better financial future (there are always exceptions, but very few). Why? Because over the long-term, the casino always wins (in general). There is nothing for the gambler to own here.
Investing in stock is a good way to build up your personal wealth. It is a great tool to offset inflation. Over the long-term, your investment will appreciate and at the same time you also earn dividend income from your stocks (from assets and things that you own).
Your relationship with the casino is limited to the time your stake is on the table. If you bet “Banker” and the outcome is “Player”, you lose and your relationship stops there.
When you buy a stock, you build a long-term relationship with the business. Your relationship doesn’t end when the share price moves up by $1 or falls by $1. It ends only when you decide to sell it.
When you lose your stake in a casino game, your stake is gone. There is no way for you to recover your losses unless you bet more of your money.
When share prices fall, you still have your stock with you. The business still runs, unless the company files for liquidation. You can still hold on to your stock and wait for the market to recover. There’s a possibility for you to recover your losses without investing more money.
There is risk in gambling. There is also risk in stock investing. However, in stock investing, you can manage and minimize your risks. Some other ways are hedging and structuring your portfolio with different types of stocks to match your risk appetite.
A true investor will have a plan. They enter and exit the market based on the prospect of the stock over the long-term. This makes them less vulnerable to short-term fluctuations, hence reducing the gambling element.Source(s): . Gambling is a game of chance. No amount of skill (with the exception of card counting in blackjack) will tilt the odds into your favor. However, in stock investing, if you do enough to learn how to trade and research your stocks before you invest, then you will fare better than the average investor. A wise investor certainly can use his knowledge and skills to tilt the odds in his favor.
- Anonymous8 years ago
There is little difference often, but not always:
First, some gambling is very safe and you have a good expectation of breaking even or making money if you follow the rules of play. Some gambling has very bad odds.
As for the stock market some investments are safe and others are risky, that is true for gambling as well. Playing the table game war (for example) is much better odds than roulette. Buying stock in Google is much safer than in some un-established company.
And if you spread your money around into enough different stocks you are less likely to lose it all, as apposed to if you used all your money to buy just one kind (had all your eggs in one basket so to speak)
- RaysorLv 78 years ago
Investing is a long running business. You may be losing one day and winning the next. It is possible to construct a protfolio and diversify away some of the risk. A poorly performing share may still pay a dividend. In the long run a well constructed protfolio should perform well. There are many types of investment including money market, Government & Corporate bonds, Collective funds, Equities, Derivatives and Alternative. An investment protfolio can be constructed to suit the investors profile and timescale. Investments may be hedged or geared up. Investment cannot be likened to gambling. Trading is more akin to gambling.
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- Anonymous6 years ago
Penny stocks are loosely categorized companies with share prices of below $5 and with market caps of under $200 million. They are sometimes referred to as "the slot machines of the equity market" because of the money involved. There may be a good place for penny stocks in the portfolio of an experienced, advanced investor, however, if you follow this guide you will learn the most efficient strategies https://tr.im/4ed13
- Anonymous5 years ago
Think of it this way. If you invested money every year in the stock market, the historical odds are very high that you would make a return on your investment over a long time horizon (say, 10+ years). If you invest money in gambling every year, the odds are very high that you will lose money over that same time horizon.
- 5 years ago
A lot of interested traders are asking themselves the question if you can really make money with binary options? The answer is that you can indeed make money in binary options trading. Learn here https://tr.im/mS1Rl
Obviously this is a perfectly legitimate question considering that most people have not traded binary options in the past and generally believe that investing is a very difficult activity.
However, you will have to put an effort into it. You will have to learn money management, reading of charts as well as the usage of indicators.
- Anonymous8 years ago
All of the above....How risky was Coca Cola, http://finance.yahoo.com/echarts?s=ko#symbol=ko;ra... or Walmart..or better Dollar Tree... http://finance.yahoo.com/echarts?s=dltr#symbol=dlt...
How risky was Enron.. http://netwmd.com/articles/wcom.gif Then if you understood the difference between the two types, any number of types of risk..There's no limit in Gain, but there's also no insurances it might go to zero.
How great were railroad stocks, till airlines got going....How great were airline stocks, till $4 fuel came along...How great were auto stocks , till competition came from overseas.,.If you understood why they were profitable, and why that advantage went away,..Then how risky of a gamble was that...
Then if you found a successful strategy,..how did it compare to your War Bond.or CD .read the "Only investment guide you'll ever need",..from Andrew Tobias
- Anonymous4 years ago
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