Is the stock market gambling? Should people consider trading in the stock market to be a form of gambling? Investing in the stock market is not gambling, and novice investors should not think of it in that way. Equating the stock market to gambling is a myth that people on the internet and television pundits have perpetuated for years.

While investing and gambling have a few similar characteristics, they are very much different. And, if an investor does not take trading stocks or buying shares of mutual funds seriously and equates it to gambling, they are in serious jeopardy of losing money or missing out on gains from the stock market that they need for retirement. Investors own a very small portion of the company.

It feels like more money is ultimately going back into my pocket with every sip. Buying shares of a company is the equivalent to having a claim on the assets, debts, and more importantly a small fraction of the profits of the company whose shares you buy.

Far too often, investors look at buying shares of a company simply as trading stocks.

Investing is very much like gambling. The big difference is time - yvajotefihy.web.fc2.com

They forget that they are now owners of the company too. To gain an advantage and earn a profit on your stock trading, investors must try to gauge the company and its profitability. Incorrectly gauging profitability in the short and, more importantly, over the long term is why stock prices fluctuate on the stock exchanges.

The profit outlook for business is always changing, and investors are using stock charts, news, rumors, company metrics, and fundamental analysis to estimate the future earnings of a company and subsequently the value of its stock in the future. A company can trade shares even without profits because investors think that the company will have future earnings.

Investors and gamblers study odds and look for an edge to enhance their performance. They look at the mannerisms and patterns of their opponents. This helps them gain useful information to influence their betting and strategy.

What is the Difference Between Gambling and Investing? - yvajotefihy.web.fc2.com

Investors have a distinct advantage with gaining information. Company information is readily available on the internet and through company filings with the Security and Exchange Commission SEC. In the Edgar database and company filings, you can find out the types of assets that companies hold and if they are a holding company that other firms underneath its umbrella. It has many other brands such as And, holdings Plc actually has shares of stock that trade on the London stock exchange.

So, imagine you invest in the holdings share and also play online at their casino, that will make you an investor and a gambler at the same time. Both investing and gambling involve risk. You have to risk capital in order to gain value in both the stock market and a casino. It is the risk that investors and gamblers take on that gives them the right to earn more than they wagered. Both investors and gamblers must know how much risk they can tolerate, though.

Every investor and gambler have a certain risk tolerance that they are willing to lose. You must know your risk tolerance before you start investing or gambling. Not knowing when to stop or sell will make you vulnerable to potentially losing more than you intended. There has to be a winner and a loser with gambling. Gambling takes money from a loser and gives the same money over to a winner every time. In investing, there can be varying degrees of winners and losers.

There can be total losers or total winners, but because investors buy and sell instead of waiting for a gambling hand to be completely over, they can have partial winners and partial losers. But, with gambling, no value is ever created. The value or money wagered is simply transferred from one gambler to another. Investing increases the overall wealth of the economy.

Companies create profits and share those profits through dividends to investors. Investors can often limit their losses and get out of a trade if they start to lose money.

Stock investors can establish a trading order called a stop loss with their broker or online brokerage firm to limit their losses. Time horizons are another difference between investing and gambling. Investing can continue indefinitely in some cases.

Many companies pay dividends to investors and reward them for purchased shares for years. You can lose money on paper as your investment value declines, but dividend paying stocks will continue to pay you typically each quarter to wait for a rebound.

With gambling, you either have to win or lose the money that you bet. There is no middle ground. Unlike investing, there is only a limited amount of information while you are gambling.

You may be able to pick up a few signals from the table or hear a few grumbles from your fellow blackjack players at a casino on whether or not the table is hot or cold. Investing is completely different. While gamblers are almost blind to any inside information that can help them get an edge on their competition.

Is the Stock Market Gambling? Why Trading in the Stock Market Isn't Gambling

Gambling and investing have a lot of similarities. But, they are also very different. Investing in the stock market is not gambling.

Equating the stock market to gambling is a myth that is simply not true. Both involve risk and each look to maximize profit, but investing is not gambling. And, gambling is not investing. Each play a unique role in our society, but investors should not confuse where the similarities end and make each one unique from the other.

What do you think? Do you consider trading in the stock market to be a form of gambling? Pepper addict , and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications.

The 5 Biggest Stock Market Myths

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