Stock Investing Is Like Gambling

Top 10 Difference between Stock Investing and Gambling Most people, especially none investors and even investors believe that investing is gambling. That is why there are always highs and lows in the stock market, because majority of stock investors believe in throwing a dice, picking a stock based on intuition and hoping that it goes up. Gambling is bound to time. When the game is over, it is over. There is just one opportunity to win or lose with gambling. When an investment such as a stock is purchased, the amount of time that an investor has to earn a profit is based on how long they own the stock. It can be a profitable investment. Aug 08, 2013 When Buying Options Is Like Gambling (And When It's Not). Or, if you already have a portfolio, that you like a stock enough to invest more, or all over again, or that you like one stock over.

Is the stock market gambling? That is a question that gets asked from time to time and when you buy a stock and it immediately goes down it sure seems like gambling. When you buy stocks, you can lose all your money. So, what then, is the difference between gambling and the stock market. Are the two really that much different?
Sometimes it may seem that you can lose just as easily at the stock market as you can at the blackjack table. Ask anyone who has lost money in Enron how they felt after their stock went to zero. You can lose big on a stock but rarely do companies go bankrupt and the stock go to zero. In blackjack or craps, however, losing all you have is quite common.
The difference between pure gambling and buying stocks of companies is that you are betting on the future of the company and you have a track record you can research. If you are invested in many stocks, you might say that you are invested in the future of the country. If something terrible happens to the country, like a natural disaster or a terrorist attack, stocks will go down. If the country flourishes and good times prevail, the stock market will most likely go up. By investing in the stock market you might say that you are betting on our future.
Gambling in a casino is a whole different scenario. There is no casino game that the player has an edge. Just take a look at how big Las Vegas has become to be sure that the house always has the advantage. You might be able to beat the house now and again but over the long run you will lose. When you are gambling in Las Vegas, you better be using money you don't need and are prepared to lose.
The key to investing in the stock market is doing research. If you were to just take a list of stocks and throw darts at them, it would be more similar to gambling. However, the more you learn about how companies are valued and operate, the more ammunition you will have when picking stocks.
When you buy a stock and it immediately goes down, it might sometimes feel like you are gambling but that is mostly out of frustration. If you do your homework and pick your stocks carefully, you should be able to make money long term in the stock market. One thing is for sure: the stock market is a much better place to be 'betting' your money than the casinos.

Dylan Lewis: Jako asks, 'Explain if/how options trading is different from gambling, please.'

JP Bennett: Great question. It's definitely something that, I believe it's kind of like a misnomer with options. People tend to think these are instruments that people who are in the markets, who are in Wall Street, or whatever, can use to create a lot of wealth, but anybody else who tries to use them is going to get hosed, or, even people who use them on Wall Street get into a lot of trouble. But it basically is just like with investing. With stocks, I believe the biggest advantage that individual investors have is their time horizon. You can try to day trade, but you give up a lot of that advantage, and really, it's going to hurt you over the long run. It's the same thing with options. You can create strategies, or basically try and trade, in a way that is very similar to gambling. If you get a home run in one of your first couple strategies, you're really set, but otherwise you're going to end up with no money. Or, you can do what we do. In Options, we target consistent winners, basically creating a diversified portfolio of options strategies to generate income and long-term capital gains, and do it in a much safer, low-risk manner. Basically, we do that in terms of how we structure our trades, what types of trades we favor, the strike prices we use, expiration dates, how much we pay. If you basically go -- I'm just looking at it right now -- our updated accuracy list for all of our close positions, we have co-advisors Jeff Fischer and Jim Gillies. For Jeff Fischer, he has a 94.6% success rate in terms of all of those strategies finish generating positive returns. For Jim Gillies, it's 87.9%. So, more often than not, we're making money on an options strategy. If you know a casino where you can go to where you can gamble and achieve those success rates, please fill me in, because I would love to go there and make a lot of money and retire early.

Lewis: That's an excellent point. The house has a much steeper advantage when it comes to gambling.

Bennett: I would also add -- what you said just triggered it for me -- basically, with options, you can set it up so that you are betting against the house or that you are the house. We like to set it up so that we are the house, so we are winning more than we're losing.

Is Stock Trading Gambling

Lewis: It's always better to be the house.