September 11, 2019

Is Stock Market Gambling?

Ace of Spade Playing Card on Grey Surface by Pixabay.

I was listening to an economics podcast in US and a guest commented that stock market is gambling. I would argue that it’s not, why, because gambling is a “zero-sum game” where in a players loss income is equivalent to other players gain income. Stock market is the opposite; your winning income depends on the success of other stock players – prices of stocks would most likely go up if the stock market players perceive that their colleague player will not sell at a low price. Thus, for a stock player to win, it is one of the essentials that his colleague must also win. 

There is also a big difference in the length of playing in gambling and stock market. Gambling is like, you bet your money that the coin will be heads and in a flip of a second, it turn out that the coin is tails, and in a flip of a second you lose all the money you bet. Stock market is not like that, or investing should I say. In investing you bet your money in a company you think that will be profitable in the future - you make a research, analyze trends, the financials, the news, and when the prices go down – you don’t lose your money as long as you don’t sell your shares of stocks. You can cut-loss, but unlike gambling, you don’t lose all the money you bet. 

This simple fact reminds me that, traders and investors should not go to stock market as if they are gambling, because stock market was established so that everyone could win – it is even called a “security” and well regulated by the government. It is also good to mention again that stock market is not a “zero-sum game”, which means your win is not another’s loss, in the long run, if everyone wants to win in stock market, a win-win mindset must always be present – not a gambling mindset.

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