Is stock market investment gambling?
Fahid Fayaz Darangay
The most common perception among people is that Stock market is a gambling den where people are cheated to lose money and it is not for the common man to indulge in.The common man has earned his money through hard work and must not put it in the stock market or he stands to lose all his hard earned money.
I remember when I wanted to learn how to trade in the Stock Market, way back in 1992, my parents were totally against it saying that it is like gambling and I rather take up a normal job and earn money the hard way like everyone else. They said stock market money is easy money and such easy money does not last for long. Easy come easy go.
Before entering any new business, even though you have a general idea of how to do the business it is most important to first educate yourself and learn how it works, how the existing players earn profits and what to do in case of a loss. Learn the tricks of the trade, which holds true especially for the Stock Markets.For the stock market the most important trick is Financial management and Risk management.
Stock market investment is not like gambling. Gambling is a zero-sum game. It takes money from a loser and gives it to a winner. Only when one loses does the other gain, no value is ever created.By investing in stocks, we increase the overall wealth of a country’s economy. In a country, the companies compete with each other and increase their own productivity. They develop value products that make our lives better.
As our investment help in the growth of the company’s capital, such capital can be ploughed back in the economy through the company’s growth. Our investments help in creating wealth with our investment, which in turn creates wealth for us. So it is a win win situation for all investors. We should not confuse investing and creating wealth with gambling’s zero-sum game.
In the Stock Market, investors who have the patience and who have done their research well have always earned money; the long term players are the investors who wait for growth in a company, rather than have short term view, to create value on their investments and it is this valuation that makes them billionaires.
There are so many examples in front of us about how investors are billionaires today. The Stock market creates a lot of value for our investment, it contributes and adds to our net worth. Before some years the knowledge about a company or the stock market was very limited, so only some people could take advantage and earn money. We used to get printed annual reports of the company at the end of the financial year, many of them used to get lost in the post office.
With the advent of the internet it has made the stock market much more open to the public than ever before. All the data and research tools previously available only to brokers are now available for the public to use.There is so much knowledge that we all share and for interested people there are trainers, like me, available to teach you how the Stock markets function allowing you to make your billion.
I would like to tell you, from my own experience, that successful investing and wealth creation takes hard work, effort and a lot of patience.You can relate a partially informed investor to a partially informed surgeon. If the surgeon reads from a book or watches how to perform a surgery on YouTube, the mistakes could be severely injurious and hazardous.
The same holds true for your own understanding and knowledge of the financial markets, which if not understood and trained correctly and be very hazardous to your financial health and planning.Always get full knowledge on the Stock market before you start investing or trading from an experienced trainer.
There is so much money to be earned in the Stock market; it is like an ocean of wealth from where you have to pick your pearls.
Gambling is the wagering of money or something of value on an event with an uncertain outcome, with the primary intent of winning money or material goods. In this definition, the uncertainty of the outcome is the key to define anything as gambling.
Stock markets, on the other hand, are not so uncertain. People have made a fortune by investing in stock markets. Warren Buffets, known as the Wizard of stock markets became the 2nd richest man in the world by wisely trading in stocks.
Coming back to the 2 kinds of people. For people who are completely unaware of how the markets work, what is the current situation in the markets and basics of investing; the stock markets may seem like gambling and a quick way to earn or lose money. But, for the people who are aware of all the things mentioned above, stock markets are not that uncertain and for most of the experienced investors, they are almost certain.
Several methods have been developed to read and predict stock markets. Hundreds of books have been written on understanding and predicting the stock markets. All of such sources can help anyone get better at investing and come out of the phase where it’s mere gambling and nothing else for them. Some might say that Intra-day trading is definitely Gambling, but experienced traders have made definite profits through intra-day trading too.
With proper knowledge of markets and investing, trading in stock markets do not remain gambling anymore.
(The author is currently pursuing Masters in Financial Economics from Madras School of Economics, Chennai)
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