Investing in shares = Gambling

Aretnap

Do you actually have an interesting or informative point to make, or are you just here to say words like "gambling" and "madness" a lot?

Thrugelmir

berbastrike wrote: »

You cannot compare the financial risk of getting hit by a bus to investing thousands of pounds in a certain companies stock. Madness!

Companies value will decrease due to unforeseen events.

BP = Deepwater Horizon
Maxwell Publishing - Fraud
VW - Emissions
BHP - Brazil dam disaster.
Hanson plc - death of the founders


Cause and effect.

Eco_Miser

berbastrike wrote: »

You cannot compare the financial risk of getting hit by a bus to investing thousands of pounds in a certain companies stock. Madness!

Actually I CAN! and DID!
Being hit by a bus may be more expensive.

Your original post never mentioned thousands of pounds, nor did it mention 'certain companies'.

grey_gym_sock

the bus driver might swerve to avoid hitting you, and as a result the bus crashes, and then the driver and all the passengers (or their families, if they died) sue you for negligence. do you have pedestrian insurance? ... no, i didn't think you did. they'll take every penny you've got, and tie you up in court for years, so you won't have any time to earn more money.

now compare the financial risk of crossing the road (very small, but genuine, chance of catastrophic losses) with the risks of investing in shares.

for a start, with shares your losses are limited to the money you put in. so at worst, you lose 100% of what you choose to put in.

and you can reduce the risks by investing not in individual shares directly, but in a fund which invests you money in 1000s of shares from many different countries. that makes it almost impossible for you to lose 100%, unless capitalism as a whole collapses. you could still lose, say, 50%, but that is not usually a permanent loss - when shares have fallen dramatically in price, they are actually more likely to bounce back afterwards.

masonic

berbastrike wrote: »

It does not risk money

If you have specific definitions of the words you used in mind, why not state them? You can gamble money, possessions, health, reputation, etc.

https://en.wikipedia.org/wiki/Russian_roulette

Aretnap

Gambling is a zero sum game in which participants (be they individuals or bookies) bet against each other, and any gains for one player come at the expense of another. A win on the horses for me is a loss for the bookie; a win for the person you're playing poker with is a loss for you. No wealth is created (unless you count whatever enjoyment he players gain from the process as wealth) and while some individuals (mainly bookies) might come away as winners over the long term through luck, skill or house edge, it is fundamentally impossible for everybody who takes part in gambling to make a profit from it.

Investing in shares on the other hand is a non-zero sum game. If I buy shares in Apple, the company will take items of low value (metal, glasss, plastic), convert them into items of high value (smartphones), and my shares entitle me to a portion of that new higher value. My gain in wealth has not come at the expense of another player who has lost wealth, it has come from the entirely new wealth which Apple have created. It is perfectly possible for everybody who invests in shares to emerge a winner, and indeed historically everybody who as bought a sufficiently diverse range of shares and has held them for a sufficiently long time has emerged a winner. (It's also possible for everyone who invests to emerge a loser. This hasn't happened yet, but might if there's a major global catatophe or a complete breakdown of the capitalist system.)

Investig in shares is therefore not remotely like gambling and to equate the two is to misunderstand the nature of investment quite spectacularly.

Of course the word "gambling" is also used in a much looser sense to describe any activity which has an element of risk or where the outcome is uncertain. In which case investing is indeed a form of gambling. However it's not a particularly useful or informative observation to make., because very few things in life have an entirely certain outcome, so using that definition I could call virtually anything that I didn't like the look of "simply gambling" and feel a slightly smug sense of satisfaction at my own cleverness, without having to do difficult things like dee stand the process of assess whether the risk was worth taking in my own particular circumstances.

Biggles

Aretnap wrote: »

Do you actually have an interesting or informative point to make, or are you just here to say words like "gambling" and "madness" a lot?

The latter. He has a track record as a serial troll.

Best not to feed it....

jimjames

Thrugelmir wrote: »

Does crossing the road involve a degree of risk?

Breathing air involves a degree of risk, even lying in bed has some risk associated with it.

It generally seems to be the uninformed who thinking that investing is gambling although I'd suggest that day trading is more akin to gambling than long term investment.

berbastrike wrote: »

You cannot compare the financial risk of getting hit by a bus to investing thousands of pounds in a certain companies stock. Madness!

Can you explain the point you are trying to make? Unless you're a communist I assume you accept that capitalism is an appropriate system for our economy and therefore companies will exist that make a profit. As a result individuals are able to invest in such companies and receive a share of those profits and growth.

Unless the whole world comes crumbling down and all companies cease to exist (in which case we'd have bigger problems than money) then your investment will always have a value. Some companies may thrive and others fall by the wayside but if you have a balanced portfolio with a wide mix then the risk is minimal.

Carnival789

I definitely see it as gambling ( which I'm not saying is a bad thing) - and I've always wondered why savings and investments have been bundled together under the same heading on this forum.

As someone who is risk averse I am all about saving my spare cash - I'm not looking to invest it any where that means I may get back less than what I put in. Contributing to my work pension is as far as I'm prepared to go as far as investments are concerned!

Chickereeeee

It's just semantics.

C