Investing in stocks is not the same as Gambling

6/26/2017



I have to be honest….I invest but it still scares me. For years I did look at investing as taking a gamble with my money because to be honest I was. Thank God for financial education to steer me in the right direction.

And I honestly don’t think that anyone ever feels totally secure when it comes to up-fronting thousands of rands to invest. I still pray that the 2008 crush doesn’t repeat itself ... considering where we are economically in our country. That would be a serious disaster. I mean the rand is 'surviving right now because the US and Europe are going through their own kind of problems.

Financial education is where it all starts. The more informed you are, the more you’re going to reduce your chances of just throwing away your money.

And the lesson that I've learned is that you don’t have to be a wizard when it comes to investing. You just have to use your time wisely.

Unfortunately, too many women confuse gambling with investing. And yes, there is a thin line that differentiates investing and gambling.

One thing I can tell you is that gambling is not the same as investing.  Still, these activities share a common thread of risk.  I see gambling as a form of entertainment – something I will do IF I can afford to do so. Just like I don’t expect to receive a monetary return when I go to the movies, I fully accept the possibly leaving the casino with absolutely nothing.

But with regards to investing, I invest to have a return. And I will not do it if there is no chance of me not getting anything back.

Thus, investing can be distinguished quite easily from gambling, and most of the conventional investments that we might be considering, such as stocks, bonds, or commodities have at least some (or perhaps all) of the characteristics of good investments. Or, they at least have the potential to be good investments, but only if we enter into them after having thoroughly researched the underlying activities being funded, their risk, and potential return.

What is Gambling?

Do you know why casinos are such profitable businesses? Because gambling is exciting.. entertaining and can make you rich quickly. That's why it's called gambling.

Gambling, as most people understand the term, produces no value to society and no product apart from entertainment. Gambling in general is designed to do one thing and one thing only – make the owner rich.  There is no skill or craft involved. Gambling is simply the exchange of money from one hand to another, often including the use of deception and the winner taking advantage of the loser with a negative expected value. With gambling, you’re playing a game of chance. Negative expected value means that over time, the likelihood of loss exceeds the potential return. The only justifiable benefit of gambling is someone’s willingness to pay for the entertainment involved in playing a game. Buying a “hot stock” on a tip, without doing significant research, is gambling.


What is investing?

Let's be honest, for most of us the word stockmarket evokes varied thoughts - risky, gamble, complex, need a lot of money, only for 'finance' people, scam, and what have you.

Investing is a legitimate way to grow money and compound at higher rates. It involves
“giving money to a business manager in exchange for, at minimum, a claim on some of the future cash flows of the business,” writes Michael Stegemoller. This differs from gambling in three ways.
First, “Knowledge matters in investment, though it by no means assures monetary gain, nor does it preclude either party from being wasteful or foolish.” The outcome in gambling depends
only on chance. Second, “an asset is purchased in an investment,” but “there is no underlying product or service exchanged in a gamble.” Finally, “the intention of the investment is for both the
businessperson and the investor to gain from the transaction,” whereas the gambler is certain to lose over time because the odds always favor the “house,” the organizers of the game.

People who think investing in the stock market is gambling don’t understand how it really works. Sadly, some people do treat it like gambling because they haven’t taken the time to learn how to invest properly. They buy a stock on a “hot tip” and hope it “wins”, like spinning the roulette wheel.
Anyone who is entering into an activity without understanding what they are doing could be gambling, whether it is a real estate venture, the stock market, or simply climbing a mountain.

As investors one of the best things we can do for ourselves is to put our money in solid, legitimate companies that will help produce well-deserved long-term results.  If history is any indicator, you’ll find that out of all the strategies out there this one is simply a great way to minimize your risks and maximize your returns.
Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it" -  Will Rogers

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