Is Stock Investing Gambling?
The title of this article is a question that pops up every now and then. Some people are very opinionated about whether stock investing is gambling or not.
That this is probably because both activities involve the use of money in hopes of gaining more. Gambling involves placing bets on games, while stock investing involves investing in stocks that companies issue to raise funds for business expansion or other purposes (like paying debts). Both activities are risky and profitable in the right hands.
We will take a closer look at the differences and similarities between gambling and stock trading, so you can decide whether or not they are birds of a feather.
Stock trading - a history
The history of stock trading goes back many thousands of years. In fact, some people traded stocks before the invention of money! The original stock certificates were pieces of paper with pictures of dogs on them. People would collect these pictures because they thought they were cute and hold onto them until a future date where they could be worth more. That’s right; the original stock certificates were dogs!
Before the invention of money (coins), many early civilisations used bartering to do business with each other. The easiest example to think of is where you would trade a cow for 10 chickens. You could have a cow, but the person who had 10 chickens didn’t want to bother having that many. So he gave up his chickens and got something he did like, which was a cow. He really wanted the cow because, to him, it would be useful on his farm.
Then somebody came up with the idea to trade cows for pieces of paper. The piece of paper had a drawing of the cow on it, and when you got another person to accept it, they would then claim to your cow. People who didn’t want real cows but just wanted the pictures would accept these pictures in exchange. The original pieces of paper were cows on them, but then people started drawing pictures of anything they could think of and use it as money.
The difference between stock and bond
A bond is like a loan from a company to you. In exchange for the loan, you agree to give the company a certain percentage of anything you earn above what the company paid you. For example, if the company pays you 6% interest on your investment, they would owe you 10% interest if your investment earned 15%.
Bonds tend to be safer than stocks because there is usually a limit to how much risk each person can take on. You can’t lose more money than you have invested in bonds. On the other hand, with stocks, there is no limit to how much money you can lose if a company goes bankrupt.
Similarities between stock investing and gambling in the casino
1. Both activities offer risk, reward and excitement
You cannot deny that both stocks investing and gambling can be exciting. There’s always a chance for you to win big or lose everything! And some people like the thrill of risking their hard-earned money. This is one thing that makes both stock investing and gambling equally exciting.
2. Both activities involve skill
But not everyone thinks that betting on stocks or playing slots is all about luck. In fact, you can’t just rely on luck when it comes to winning big in the stock market or at a casino. Skilled investors will always try to do their best to read company earnings and stock trends accurately. I’ve personally seen how some people make a killing in the market by studying trends and purchasing stocks at heavily discounted prices.
3. Both activities require money
In order to bet on stocks or play casino games, you need money! And you also need cash if you intend to start investing in the stock market. So, this is a similarity that both activities share.
4. Both activities are only for adults
In most countries, betting on stocks or playing casino games are strictly prohibited for minors. The reason for this is because neither companies nor government wants to encourage young people to play stock investments or gamble. This is because both of these activities are risky and may tempt minors into becoming spendthrifts.
Stock Investing Gambling Example
To help you get a better idea, let’s take a look at an example that compares stock investing with regular gambling:
Here’s how it works: if you invest $1,000 in a company that issues 4 shares at $50 each and the company’s stocks increase to 50 bucks per share, your investment will grow to $5,000. But if the company’s stocks get downgraded by its investors, then your investment will decrease as well.
This is just one of the many stock investing strategies you can use to rake in big money, but this is also risky.
Differences between gambling and stock trading
With all of the similarities that we mentioned above, you will probably wonder about the differences between gambling and stock trading. Here is a list of the main differences that we can think of:
1. Gambling can be based on play money, while stock investing always involves real money
If you have ever played classic casino games like slot machines, Blackjack or Roulette, you will notice that the money involved in gambling is called “house money”. In online casinos, you have a choice – you can play for free (with no chance of winning real cash) or make a deposit and play for real money. That gives you also an opportunity for a win!
With stock investing, on the other hand, you are never playing with fake chips. Instead, you are using your own money.
2. Gambling involves a good share of luck, while stock investing is skill-based
Skilled traders tend to do a lot of research before purchasing stocks or bonds. This means that gambling is all about what the numbers say, while stock investing is limited by the trader’s knowledge.
While at AllGambling we are focused on bringing the knowledge and best casino strategies to the players, it is not a secret that online gambling is random; its result is separate from what happens at the markets currently.
In gambling, you can’t anticipate how each roll of the dice will turn out. No one knows what card to play next in Blackjack. It’s all about luck and probability in that sense. When it comes to stock investing, however, a lot of research and analysis is involved. Stock trading isn’t a game, after all, so you have to devote your time and energy to the task at hand to avoid costing yourself more than what you can afford to lose.
3. Gambling can be a form of socialising, while stock investing requires complete privacy
Stock investors are all about privacy. There’s no need for you to reveal your investment strategies and techniques, especially if it involves trading big numbers or stocks with a high-risk factor.
4. Gambling is a more casual activity, while stock investing requires serious planning
It’s very common for people to play casino games and bet on stocks as a means to de-stress or unwind. You could say that both gambling and stock trading are like hobbies for some people. On the other hand, those who invest in stocks tend to have a bigger goal in mind. They need to carefully study each potential investment before they can move on to the next one.
5. Gambling is done for entertainment, while stock investing requires a profit
There’s no reason why you would want to play casino games or bet on stocks if you don’t expect to make a gain, right? No matter how much fun it may be, betting on stocks and playing casino games should never be your main source of income. It’s just not worth the risk.
Stocks and Gambling: Friends or Foes?
So, which one of these activities is more profitable? It’s hard to tell since both have some risks attached. But if you know how to gamble using good strategies and learn how to spot good value stocks, you can make a killing at both activities. The decision is up to you. You will have to decide if stock investing is as great as gambling or vice versa.