Have you heard someone say, "Investing in the stock market is just like gambling at a casino?"
True, investing and gambling both involve risk and choice—specifically, the risk of capital with hopes of future profit. But gambling is typically a short-lived activity, while equities investing can last a lifetime. Also, there is a negative expected return to gamblers, on average and over the long run. On the other hand, investing in the stock market typically carries with it a positive expected return on average over the long run.
When you gamble, you own nothing, but when you invest in a stock, you own a share of the underlying company.
In both gambling and investing, a key principle is to minimize risk while maximizing profits. But when it comes to gambling, the house always has an edge—a mathematical advantage over the player that increases the longer they play.
In contrast, the stock market constantly appreciates over the long term. This doesn't mean that a gambler will never hit the jackpot, and it also doesn't mean that a stock investor will always enjoy a positive return. It is simply that over time, if you keep playing, the odds will be in your favor as an investor and not in your favor as a gambler.
"Neither get in or out is an investing strategy. Period, that's just gambling on moments in time. And investing should always be a disciplined process over time.”
Another key difference between the two activities has to do with the concept of time. Gambling is a time-bound event, while an investment in a company can last several years. With gambling, once the game or race or hand is over, your opportunity to profit from your wager has come and gone. You either have won or lost your capital.
Stock investing, on the other hand, can be time-rewarding. Investors who purchase shares in companies that pay dividends are actually rewarded for their risked dollars.
Both stock investors and gamblers look to the past, studying historical performance and current behavior to improve their chances of making a winning move. Information is a valuable commodity in the world of gambling as well as stock investing.
Investing and gambling are very alike indeed.
回覆刪除Yet time will tell if you have chosen a good stock since you can simply sit back and let the management and staff work for you.
For gambling, time is usually not on gamblers' side.