Investing in shares = Gambling

Legacy_user

"Investing" in shares is simply gambling. Do you agree/disagree with my opinion?

HappyMJ

Agree.

It's generally a bit less risky than placing bets with a bookmaker on an odds on favourite where you would lose the stake if the selection somehow defies the odds and loses but it's still gambling yes I agree. You could make 10% profit or you could lose 10% of your stake. Over time you could also double your money but you could also lose the lot.

Rollinghome

berbastrike wrote: »

"Investing" in shares is simply gambling. Do you agree/disagree with my opinion?

Neither. It entirely depends on how you choose to define "gambling" and the intention of the individual when buying shares. Holding savings as cash might also involve an element of gambling in certain circumstances.

Aegis

Disagree. Gambling is negative sum due to the house edge, i.e. in the long term the house edge means you will always eventually end up losing (barring those who stop gambling while ahead, riding the variance of their returns.

In the UK stock market, the long term position is that equities return between 4% and 5% ahead of inflation, therefore the game looks to have been positive sum for the last 115 years or so. this is intuitive, as what you are doing is buying ownership of a cash generating asset.

Naturally the averages fall apart if you don't diversify properly, invest for too short a timescale or only buy high risk shares, but no, proper investing in shares is not gambling in my view.

Chickereeeee

Why limit to shares?

You could consider investing in anything as 'gambling'.

Or not.

C

bowlhead99

To copy paste from couple of old posts:

On short vs long term as an investor:

The difference between investing and gambling is who has the edge.

Arguably if you go to a casino and play blackjack or roulette you can try the trick of starting with a very big pile of chips and just leaving and banking it when you've made £100, and you'll achieve it many many times, but one of those times you'll never make it and you'll never recover because the house has too much of an edge for you to get back above water. The optimum amount of time to stay in the casino is zero.

With LTBH investing in a diversified enough set of assets with low enough management and dealing costs, generally the investor has the edge rather than the house (due to dividend payments and capital growth of an economy over time) , and so the optimum amount of time to stay in the market is forever.

With short term trading with positions of a few days or weeks or months, you are not investing for a long enough term for the 'growth of an economy over time' argument to persist and the right bet to be placing might be up or down, while the market makers or trading platform will take a cut from both sides. So if the trades/bets being placed are large in relation to your capital, even a talented trader with a 'system' still faces risk of ruin. Not unlike a professional gambler who can beat his peers and the rake at poker, or count cards to get a tiny edge on blackjack, for a general consistent profit despite a wide variance, but still get killed by a bad run. Money management is key, along with some luck.

On day-trading:

If you buy a share and sell it after 15 minutes it might be more or less than you paid for it. Like if you go to the casino and play a hand of blackjack the perfect way - you might beat the dealer or you might not, it depends what cards you are dealt. If you want to be able to make a few hundred pounds in a matter of minutes you have to be prepared to lose a few hundred pounds in a matter of minutes, and it's out of your control. Your few thousand pounds can be gone within a day, just like if you took that few thousand pounds to the casino.

So sure, you can "buy, wait for the price to change and sell". But what do you do when the price only goes down and not up. Do you sell when you have a big loss? Or do you buy more when you have a big loss and end up risking a bigger one?

If you buy shares and hold for 10 years it's the opposite of a casino. At the casino in a one-day visit, the house usually wins but sometimes the player does. Over the long term, the house wins. If you invest in buying shares in the casino, you will usually win over time instead. But you have to be willing to hold 5,10,20 years for it all to average out in your favour. Because in a shorter timescale you could lose half or all of your money.

Basically if you invest *IN* shares of a casino you are making money out of the fact that in the long term the casino's business model should result in him making a profit. Which is very different to walking through the casino door and asking to place a bet.

Similarly if you invest in shares of a manufacturing company or a retailer you are making money out of the fact that in the long term the business model should result in a profit being made.

As you do not know whether Casino A will be more successful than Casino B or Manufacturer C or Retailer D, it is sensible to spread your investments widely through collective investment schemes. That is not gambling, it is exchanging money for ownership shares of businesses with a long term expectation of reward.

Chickereeeee

Cambridge online dictionary. Gamble: To do something that ​involves ​risks that might ​result in ​loss of ​money or ​failure, ​hoping to get ​money or ​achieve ​success.


In all definitions I have seen, the odds do not come into it. If you are less than 100% certain of the outcome, it is a gamble. As indeed is pretty much everything else you do in life.....


C

Rollinghome

Aegis wrote: »

Disagree. Gambling is negative sum due to the house edge, i.e. in the long term the house edge means you will always eventually end up losing (barring those who stop gambling while ahead, riding the variance of their returns.

That seems to ignore that there are professional gamblers who are able to beat the "house". I knew a very successful full-time gambler for many years.

It also ignores that in many forms of gambling there is no house involved. For example private card games or on the simple flip of a coin. Both would clearly still be regarded as gambling.

I don't "gamble" but by holding shares I take the gamble that they might out-perform cash. By holding cash, I take the gamble that cash might out-perform shares. Some of that cash is held as NS&I Index Linked certificates as a gamble that inflation might take off. I hold all three, and other assets, to reduce the element of gambling.

The last time I gambled in the more usual sense was at Epsom at the age of 10 when my father gave me 4/- to bet on the Derby. I lost and found that the bookie kept my 4/- while I had nothing. I didn't understand the attraction after that.

Biggles

berbastrike wrote: »

"Investing" in shares is simply gambling. Do you agree/disagree with my opinion?

I don't know what has formed your 'opinion' but anyone who puts their money into equities or property, for the long term in a sensible manner, has normally ended up with more money over the years. Anyone who gives their money to a bookmaker, in the long term, always ends up with less money.

I'm not sure if that answers your question or not.

masonic

Chickereeeee wrote: »

Cambridge online dictionary. Gamble: To do something that ​involves ​risks that might ​result in ​loss of ​money or ​failure, ​hoping to get ​money or ​achieve ​success.


In all definitions I have seen, the odds do not come into it. If you are less than 100% certain of the outcome, it is a gamble. As indeed is pretty much everything else you do in life.....


C

One can often cherry-pick a definition that suits ones liking, but the fact remains that words mean different things to different people and there are usually multiple dictionary definitions for the same word, even in the same dictionary. For example...

http://www.oxforddictionaries.com/definition/english/gamble

However, the OP used the word "simply" to preface "gambling" in the statement we are discussing. More goes into investing than "simply gambling", so I disagree with the statement.

dunstonh

In the same way that walking down the street is gambling or walking up stairs.

Everything has risks. The risks are varied. Investing has risks and gambling has risks. However, the risks with investing will typically be far lower as you are not gambling a total loss scenario in most cases. Whereas when you gamble you are.