One of the things that I often hear from the public, family and friends is that participating in the stock market is like gambling. You have no way of knowing whether it’s going to go up or down or sideways. You place your bets and hope you’re right. If not? Oh well you lose money. That’s gambling and that’s the deal when you sign up. But none of this should be true. The stock market is NOT meant for gamblers.
The Finance 202: The stock market is betting on a Biden victory with Brent D. Griffiths Stock market investors believe Joe Biden is going to win the presidency, and they’re betting with their. QUESTION: Thomas in Arizona invests in the stock market, but a friend at church says that is like gambling. Dave is happy to explain why he disagrees, and he defines what gambling is. ANSWER: He doesn’t get to define gambling. He’s not Webster’s just because he wants to be a cynic. He doesn’t get the opportunity to define gambling. Future Of Sports Gambling: Sosnoff said the average cost to make a $1,000 bet in the stock market is $1 to get in and $1 to get out based on the bid-ask spread.
When I look at markets (and we’ll expand to all markets, not just stocks), what we search for is a risk vs reward opportunity that meets our time frame, risk parameters and objectives. We’re all different and we have different answers for all three of these. But to me, if the risk is $1 for every $5 of potential reward, the trade is skewed in my favor. I can be wrong 80% of the time and still not lose any money. And more often than not, the risk/reward opportunities I look for go beyond 5:1 and lean closer to 8:1 or 10:1 in an ideal situation.
When you gamble, let’s say on the Super Bowl, what are you really doing? You’re picking a team and hoping they win. If you’re wrong you lose it all, if you’re right you double your money (which is actually less if you include the vig). So you’re looking at less than a 1:1 risk vs reward. That’s a coin flip that can go either way. This is gambling.
Many people do not differentiate between the following terms when they invest their hard-earned money in different asset classes, particularly in stock market and often get confused between; 1. Trading Vs Gambling In Share Market. Hello Friends, Hope you all doing good in your trading in the Stock Market. Today I want to share you some concepts which helps you to think again that are you doing trading as a professional trader or like a Gambler.
When you see a chart trading right in the middle of a huge range, once again your risk reward is 1:1. That’s not in your favor. This is gambling.
There is a huge difference between using the market and focusing your attention on risk management and just throwing money at the market and hoping for the best. “Hey I heard these marijuana stocks are doing great, I should buy some”. You have no idea how high they can go and you have no idea at what point you say you’re wrong and get out. Without a plan it’s called gambling.
If you see a major reversal day and a stock makes a new high and then rolls over hard, you can short it. You’re wrong if the stock makes a new high taking out your stop loss – and you know this going into the trade. Figure out percentage-wise how much that is and then see if your price target is far enough away that it presents a risk/reward favorable enough to enter. Does it meet your risk parameters? Does it fit your time horizon? Does it match up with your overall market objectives? Yes, yes and yes? Go for it. If it doesn’t, then at least you know and you stay away. This is called risk management, not gambling.
There is a major difference between the two. The market can be a gamblers paradise. But that’s not what we are here to do. Our #1 priority is always defense and risk management. $TSLA is a good example of one that I never traded on the long side. Why? I could not define the risk. If I can’t answer the question of, “how much risk am I taking in this name?”, I will not enter it. I’d rather miss out on the upside than risk more than I’m comfortable with to the downside. Sure it may be frustrating at times when you see a name you like go up without you. But that’s the business. That’s the downside of staying disciplined, defining your risk tolerance and objectives.
On the other hand, if you do your homework you will always be able to find risk/rewards that are skewed in your favor. I myself take pride in looking at stock markets from all over the world, not just the Dow Jones Industrial Average. More importantly, we take our analysis across asset classes and position ourselves in fixed income, commodities and currencies when the opportunities present themselves. And if you look at enough markets, trust me you’ll find plenty to suit your needs.
So when somebody tells you that the stock market is gambling, wink at them at tell them that it can be. It happens to be a giant casino for far too many people. But if you manage risk correctly and stay true to your goals and risk tolerance, there is no gambling involved. This is a risk manager’s paradise.
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Think investing is the same as gambling or scratching off a lottery ticket?
Many people are nervous about putting their money in the market and hesitate because they believe that investing has more to do with luck than anything else.
In other words, they believe their ability to earn a return on their investment comes down to pure chance—like the flip of a card or roll of the dice. Investors and gamblers do have one thing in common: They both want to put more money in their pockets.
Investing vs. gambling
Investing and gambling could not be more different.
| Investing | Gambling |
|---|---|
| You control your risk. You can invest according to your goals and timelines: Conservative, moderate or aggressive. | Risky. The odds are always in favor of the house. |
| Strategy: Slow and steady. Investors plan to make a consistent return on their investments every year. | Strategy: Fast money. Gamblers bet it all for the chance to make a bundle fast. |
| Taxes: By putting your money in a retirement account, you can defer paying taxes on your investment earnings. | Taxes: You have to pay taxes on any gambling or lottery winnings over $600 |
Here’s why investing your money is typically a better option for those looking to increase their wealth, rather than buying a lottery ticket, or going all-in with a pair of jacks:
The odds are in your favor
Anyone familiar with gambling has likely heard the phrase “the house always wins.” Since casinos are in the business of making money for themselves, that means the scales are tipped in favor of the dealers.
Investing is generally a much more effective way of making your money work for you. And most importantly, investors have a lot more control in where your money goes and how it can grow.
Gamblers hope for a quick win. Investors want to build wealth over time
For example, if you bet $1,000 that the roulette wheel hits your lucky number, you’ve got one shot at cashing in. Your odds? 35 to one. That’s a risky bet. And there’s a good chance you’ll walk away from the casino with less money than when you walked in.
Understanding risk
Investing involves risk. But by building a diversified portfolio with stocks, bonds, and holdings from multiple sectors (tech, energy, etc.), you can balance out your risk. In other words, you’re not betting it all on one investment—or putting all of your eggs in one basket.
If one investment goes down in value, you’ll have other investments that may hold steady, and keep your portfolio afloat.
For example, numerous advisers say an effective way to manage your money is by applying aspects of Modern Portfolio Theory (MPT). Nobel Prize-winning economist Dr. Harry Markowitz conceived the idea for MPT which formed the foundation for portfolio management by balancing risk and return.
The general idea of MPT is that by investing in a diverse assortment of stocks, bonds, and other securities in a multitude of countries, you can minimize risk.
Invest with a plan
Sports Betting Or Stock Market
You’ve probably seen news reports about people who win a lot of money at the casino or by playing the lottery. These make it seem like a lottery win is not only possible but probable. Unfortunately, it’s not. Losing is nearly inevitable when you gamble.
Gamblers hope for a quick win. Investors want to build wealth over time. Fast money sounds great but it isn’t an actual plan to get you to your goals.
Gambling Vs Stock Market
Rather than just “win big,” many investors have a specific plan as to what they’re investing for in the long term. This goal, whether it’s saving for a down payment or a child’s college education, should align with your investment strategy.
Once you have a plan in place, you can adjust your portfolio according to your timeline.
The power of compounding
By choosing to invest your money with a solid strategy you can allow your assets opportunity to compound over time.
Here’s how compounding works:
Say you start putting away $50 a week in an investment account that owns a variety of stocks, bonds, and cash. If that account earns an average of 5% annually, you’ll have over $159,669 in 30 years when the interest is compounded annually.