Skip to main content

Why Investing in Stocks is NOT Gambling? Myth Simplified!

What is Investing?

The basic purpose of investing is directing your liquid capital towards companies that need it. This however is done with the intention of generating income or profit. But along with this while investing one’s money into a company one also boosts the wealth of the economy as it helps them commit that capital to assets to increase productivity, aid growth, hire more people, etc.

This leads to an increase in the value of the company and an increased value of our investment in it. Investing is not devoid of risk which depends on the factors like the level of research, the period of investment, etc.

What is Gambling?

What is Gambling?

Gambling, also known as betting is wagering money or something of value on an event whose outcome is uncertain. This is done with the aim of winning the prize money. Some examples of gambling are Lotteries, Card games(poker, blackjack), Slot machines, etc. 

Differences between Investing in Stocks and Gambling

Although both of them include a series of decisions, risks and are done with the aim of profitability they have a lot of key differences.


1. Level of Control

Investors and gamblers have varying possibilities of mitigating their losses. After deciding how much they want to invest, investors can choose the asset class they want to invest in which have varying levels of risk. For example assets like bonds have low-risk low returns whereas stocks have a high risk with the possibility of a higher return.

In addition, the size of the companies also offers varying risks, eg. blue-chip stocks have lower risk in comparison to small-cap stocks. In addition, investors also have the option to save their capital. If they find out that their investment has begun making losses they can always decide to sell their investments.

Gambling on the other hand is a sum-zero game. Out of all the money pooled it is only a few or in some cases only one person who wins big at the expense of others. It also diminishes the possibility of you winning your capital back or limiting losses. Take the lottery ticket for eg. if you do not win the lottery you have lost the complete Rs.1000 capital you poured into the ticket.

2. Environment

The environment differs massively between the two. Investing has been made so accessible that one can pursue a career in trading from the luxuries of their homes and investing can simply be done through smartphones. 

Gambling on the other hand is a completely different ball game. Although there are online means and lotteries casinos still occupy the greater share. Casinos bring shows, food, drinks, and a lot more to the table. Most casinos are designed in order to play on the weaknesses of human psychology. These include glittering lights, music, and free drinks, all these set at dulling your senses, weaken your decisions, and most importantly keep you there all night long.

3. Stock Exchange vs. The House

For investors stock exchanges simply serve as a medium or platform for investing to take place. They charge minimal amounts for every trade and strive for increased efficiency.

 The house in gambling refers to casinos, bookmakers, slot machines, etc. It is a common term in gambling that the house always wins. The games generally have different varied edge over the players with benefits going to the house. In card games, the advantage for the casino might only be 0.5%, but certain types of slot machines might have a 35% edge over a player—other games fall somewhere in between.


4. Time Factor

In investing the longer you stay the lower your odds become of making losses. This is the exact opposite of gambling. it does mean that the more you play, the more the math works against you. There are greater chances of you walking out of the casino with less money than when you came in. Take the examples of slot machines, they have odds ranging from one in 5,000 to one in about 34 million chance of winning the top prize when using the maximum coin play.

The period of participation also differs here, when investing your participation can actually span decades. At the same time even if the shares may not increase significantly in value investors are still rewarded for staying invested in the form of dividends. When it comes to gambling once the game or race or hand is over, your opportunity to profit has gone.

5. Information

Knowledge is power! Information is important for both investing and gambling but it is available in varying amounts. Investing is abundant with information that is ready to use. Company earnings, financial ratios, research analyst reports, can be easily found online before investing. When it comes to gambling the information available is extremely limited and worse it is not always quantifiable.

Closing Thoughts

In this post, we discussed why investing in stocks is NOT gambling. Despite a number of differences stock market investing can still become a gamble for many. This is because of investing without research, speculation, investing all your money ina single stock, etc.

Investing after doing a thorough study is rewarding in the long term whereas flipping a coin to select a stock makes it a gamble. Although the stock market is hard to understand it sure does make much more sense than a casino.

Comments

Popular posts from this blog

Best crypto-currency for investment in 2024

Best crypto coins for investment in 2024 For 2024, several cryptocurrencies are considered promising for investment due to their market performance, technological advancements, and strategic developments. Here are some of the top picks: 1. **Bitcoin (BTC)**:    Bitcoin remains a dominant force in the cryptocurrency market, often seen as "digital gold." Its value proposition as a store of value and the recent approval of spot Bitcoin ETFs by the SEC have bolstered its appeal to investors. 2. **Ethereum (ETH)**:    Ethereum continues to lead in the smart contract space, supporting a vast ecosystem of decentralized applications (dApps) and decentralized finance (DeFi) projects. Its upcoming upgrades, aimed at improving scalability and reducing transaction costs, further enhance its investment potential. 3. **Binance Coin (BNB)**:    As the native token of the Binance exchange, BNB is integral to the Binance ecosystem. It offers utility in trading f...

How to make or income daily 1 to 2 lacks in india By Tradersguruji

  Making 1 to 2 lakhs (100,000 to 200,000 INR) per day in India is a significant financial goal, and there is no one-size-fits-all answer to this question. However, here are a few ideas to consider: 1.Starting a business: Starting a successful business can be a great way to earn a significant income. Consider identifying a market gap or a problem that needs solving and developing a business plan to address it. 2.Investing in the stock market: Investing in the stock market can be a good way to generate high returns, but it also involves a significant amount of risk. Consider investing in a well-diversified portfolio of stocks, bonds, and other financial instruments. 3.Trading: Day trading or swing trading in the stock market can be a way to earn significant profits quickly, but it is also high-risk. Consider gaining a solid understanding of the stock market and learning about technical analysis and risk management before investing. 4.Real Estate: Investing in real estate can be a p...