Beginner's Risk - Investing in Stocks vs Gambling

Beginner's risk is stock market is the opposite of beginner's luck in gambling. Refer to it as the phenomenon of losing money by investing in a hot stocks without knowing anything about the business and by just blindly following the herd.

Why is stock market compared to gambling?

Gambling is to take risky action in the hope of a desired result whereas smart stock market investing is to take non risky action in the hope of excellent result.

As a beginner you are bound to make a dumb investment move in the hope of the excellent result or a quick return. Usually you end up on the losing side. Art of investing in stock market needs some experience; more than anything it requires a lot of self control and patience which is not expected in a beginner. Investing as a gambler will result in losses more often than not.

What are the similarities in Gambling and Investing in stock market?

Mode of exchange: Chips and Digital Currency

• Have you ever wondered why the casino convert you real money to chips, because they want you to gamble and bet high without fear.

• Nowadays stock market investing is in your fingertips and investing with digital currency is less impactful than putting real money(at least during buying and selling).

No Research Requirement:

• In gambling there isn't any great research material that can grant advantage over the house. the games are designed for you to lose.

• In investing there is no requirement for an investor to research about the business before investing. I am free to buy and sell anything without even knowing anything about the company

Jackpot news is always on the front page:

• One in a million might hit a jackpot in gambling once in a while

• One in a million might exponentially grow with their yolo bets

Stop and Start:

• You can stop anytime after a hand in Gambling and can join back when you feel like.

• You can sell your stocks anytime and go back to digital currency

Losing money can cause panic:

• Losing money in gambling can cause panic and we often see some "all-in" bets.

• As a beginner in stock market, losing money will test your sentiments and downturns usually result in panic selling.

What are the difference between investing in stock market and Gambling?

A business behind your money:

• Investment in stock market is basically being a business owner. You are taking a stake in the future of a business.

• Betting on a hand in casino means your are betting on a hope that the deck gives you some amazing cards to beat the dealer or fellow players.

Play a long game in stock market:

• Investing in stock market doesn't require rapid quick moves. You can patiently wait for your investment to play out the way you want.

• Betting in casino is time bound, people around you are waiting for you to make moves

More in control of your investments in stock market:

• Analyzing a business or a sector, management of the business, future runway, government support or supply demand issue and various other factors can totally change the odds of you making money in the stock market. Being better informed on the investment can be easily achieved in the stock market.

• Every hand in a casino table is not in your control. There are a lot of steps taken to avoid card counting to give you any advantage.

Returns are infinite in stock markets:

• How profitable or how high a stock might reach is not in anyones control. The returns could be just way beyond your imagination and extremely rewarding.

• You returns is based on your luck and I am sure no one in the world is lucky all the time.

Knowledge of the world and business develop when you invest in stocks:

• Stock research expands your knowledge about companies in various sectors. You would be up-to-date with all the latest happening in and around you.

• Gambling doesn't improve your knowledge, its mostly an entertainment for people to have fun.

You get dividends too from your investments in stocks as the companies share their profits with the shareholders. There are a plenty of differences between the two, it all depends on whats your style of investing.

Quote from Jack Boyle that clearly sums stock market investing -

"In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses."