Y do people say that investing money in stock market is similar to gambling?
Because the stock market is very volatile and returns cannot be guaranteed. A person can do tons of research, and investigation on a good stock and still it can drop like a stone due to unforeseen circumstances.
Because most investors have a very limited knowlege of how financial markets work. The stock market clearly had volatility. Yet is is nothing like gambling in a casino. Those that understand how asset classes correlate understand that for most people not having any exposure to the market is the real gamble. In reality there is no such thing as a riskless place to hold money. If you sit in cash you have inflation risk. If you own only fixed income you have both some inflation risk as well as interest rate risk. The stock market has more principal risk. The combination of all assets together in their proper proportion is what produces the least amount of risk over the longer run.
People say that investing money in stock market is similar to gambling because they think money is made or lost in the stock market as readily as in the gambling house.
The people who made this statement do not understand the stock market. All they know about stocks is that money can be made or lost.
In the stock market you can search for profitable companies that have scope for growth and which are selling at bargain prices.
The greatest difficulty is to determine the intrinsic value of the company. Once this is done, compare it with the present market price. If market price is two thirds or less of intrinsic value, you have a bargain stock which has great growth potential.
Gambling gives less edge over the system. The odds are highly in favor of the business doing the gambling, and not the gambler.
There are some similarities. In both gambling and investing in the Stock Market, you can lose the money you put in. And if you are trading stocks over the very short term, most of the money you make is from "random" unpredictable fluctuations in prices, a bit like gambling.
But there are also important differences. If you invest in the stock market for the long term you would expect that the companies you own a stake in would make profits and share some of that with you - not true with gambling. In gambling, over the long term, the "house" always wins.
You have to remember that nothing in investmenting (or in life in general) is really risk free. Successful investing is all about understanding and being comfortable with the risks you are taking.
by jomine 7 years ago
we might be able to invest in different sectors, but how can we predict which industry or which sector will be going up?what are the indicators to say the stock market is not going to crash or what are the indicators to say it is only in a correction and not recession? minimum are there any...
by Zara Rasul 7 years ago
Do you invest in the stock market?Buying and selling stocks... is it a legitimate way of making money? Or is it akin to gambling?
by Arian Won 9 years ago
I know the stock market is bad, but I'd like to start investing as I know there are a lot of great bargains out there. So if anyone can recommend any published books that they have read themselves, I would appreciate it.
by Daniel J. Neumann 8 years ago
Do you feel confident investing money in the stock market?Why or why not?
by TimTurner 8 years ago
The stock market has risen about 15% in the last 3 months and about 80% in the last 8 months. Seriously?We are still losing close to 200,000 jobs a month and small businesses are hurting. The economic data is very mixed. The ONLY reason why the last quarter looked so good was...
by Persson 7 years ago
I would like to start investing a little in the stock market. Use say about 1k. Any starting ideas?
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