Stock Market Investing or Gambling?

I was posed a question about gambling. Is gambling in a casino a kind of investing? I always believe that there is actually a very very fine line between investing and gambling and if you are “sober” you will definitely be able to see that line.

Of course, clearly enough, if you go to a casino with a lot of cash, you are going there to gamble, hoping to win more money than you are prepared to lose. And this kind of “hope” has a 90% chance of disappointing you.

Many risk-taking choices are referred to as “gambling” but investments are usually not considered gambling, although some investments can involve significant risk. Some examples of investments can be stocks and shares, bonds, real estate and businesses.

Wikipedia explains that “Investments are generally not considered gambling when they meet the following criteria:”

• Positive expected returns (at least in the long term)
• Economic utility
• Underlying value independent of the risk being undertaken

Some risky speculative investment activities are still usually not considered as gambling but I would like to warn that if you are always purchasing stocks with no fundamentals to speculate that would equate very close to gambling. It is high risk as you risk losing a good chunk of your money.

Psychological aspects

Some people participate in gambling as a form of recreation or even as a means to gain an income. Gambling, whether legally or illegally, like any behaviour involves the variations of brain chemistry, therefore can become addictive and create bad behaviour in some individuals. Gambling being additive can cause gamblers to persist in gambling even with repeated loses. This can be damaging to your life and peace of mind.

The right reasons to invest in the stock market

If you speculate all the time, that can go very close to gambling but if you study the company behind every stock that you intend to invest, wait for the right price to go in, then you are an intelligent investor.

Yes, you have to find the right reason to invest in the stock market. If you want to earn quick bucks on a short term basis, then you are treading on the brim of gambling. Beware….

The actual and the only right reason for people to go into stock market is to continuously earning an income.

Look for company that issue quarterly dividends and continue putting in the earned dividends into purchasing more of such shares. Make a long term investing plan and aim to retire with your invested money.

By investing for the right reason and using the right choices you automatically become a long-term, dollar-cost averaging, buying investor.

Be smart, spend your time to start studying good companies and concentrate only on a few. Diversify if you must but do not over-diversify or you will end up using too much time studying too many companies. Diversify by selecting a few different categories but here again not too many. By studying the history of companies and their dividends payment percentages and pattern, you will be able to decide on the type of stocks you want to invest in to take you to your retirement years.