Someone brought on a good point about the stock market. Although aware that the person who informed me never really invested on the stock market, but the person that told him was, it still is something I need to look up on.
What he said was:
Did you know that the whole stock market thing is nothing but gambling? All that you are really doing is risking your money and hoping you come out lucky.
There are some truth about that remark since you are hoping to come out with the longer end of the stick. But unlike gambling that we all know oh so well, you are technically using wise judgments and strategic analysis, other than relying only on probability and a blessing that God wouldn’t be apart of.
What does any of you think about the stock market compared to gambling?
Oh Boy! 9:03 am on April 12, 2010
That’s stupid.
The company you invest in uses capital, both financial and human, to generate a profit. As a shareholder some of that profit is yours. The company may distribute it as dividends, or they may plow it back into the company or they may make an acquisition. Over the long run, investing in good stocks is nearly riskless. Can you say that about gambling.
HABS_SD 9:03 am on April 12, 2010
There are no guarantees in the market, so in a sense one could argue it’s gambling. Furthermore, the key to success in the market (much like a poker game) is money management. Keeping losses small and running the winnings in to big numbers in order to come out in an aggregate positive bank roll. So in that sens too one could argue it’s gambling.
The advantage here however is there is no "house" setting the odds against you. One makes educated guesses and plays with stops, trail stops, etc… If an average Joe six pack decides to buy stock and hold it to increase his capital, than it’s pure gambling. However, if the individual is informed and educated, one can keep the "odds" in ones favor.
Remember, only a fool with too much money would buy stock without due diligence and hope for the best. Those who are successful in this business do NOT gamble (using the word gamble in it’s purest form here)
Hope that helps shed some light.
Good luck and happy trading.
SDD 9:03 am on April 12, 2010
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.
Manshu 9:03 am on April 12, 2010
Stock market is a market where you can buy assets in the form of shareholding in a company.
Companies will never perform overnight but somehow people expect that the underlying value will rise overnight. The underlying value is nothing but stocks.
They buy and sell like crazy, make losses and then blame the market for it.
There are hardly any investors who invest for the longer term, say just over 3 years holding period for one stock and make any losses at all. If you invest in stocks that hold good value and then give them sufficient time to shine, there is no way you will make a loss.
But the number of such investors is few and the voice is not loud enough.
Sam 9:03 am on April 12, 2010
Trying to speculate and time the market is a gambling game, and it’s played by suckers every day. In order for someone to gain in the market, someone has to lose.
While the the world and its stock market is always volatile and far riskier than other money tools, investors often see that risk as the best hedge against inflation. That’s because, historically, stocks have always gone up in the long-term.
The stock market becomes an essential tool to maintaining and increasing ones net wealth when thinking in the long term. By finding an asset allocation you are comfortable with for your portfolio, selecting high quality no-load well diversified funds for that portfolio, and re-balancing that portfolio periodically you are strategically growing your wealth while keeping risk at a minimum.
jsforex.blogspot.com 9:03 am on April 12, 2010
If you are making money out of it, then it is strategic investing. If you are losing money, then call it sophisticated gambling.
Why? Because if you are making money trading stocks, then you have done your homework, paid your dues, and know what it is you are doing. On the other hand, if you are losing, then you are putting your money into something you do not entirely understand.
Cheers!
http://jsforex.blogspot.com
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