Investing in the stock exchange is wind trading. I have been calling that out to friends who are working with shares and options for several years. That’s not to say I’m against it. But you can name it. Investing is gambling in the hope of making a profit; it’s not called speculating for anything.
I’m not the only one who feels that way. In analyzes of the financial crisis, which started in 2008, the word gambling was frequently mentioned. Banks and stock exchanges had built a web of shadowy structures. All with beautiful names and, at first glance, lucrative terms. When it went wrong, the investor was wrong or wrongly guessed.
Investing is gambling
For example, leverage was notorious at the time. A company with little or no capital got money from investors (investors). They used it to borrow money from banks, sometimes up to five times the amount invested by investors. President Obama said about this in 2010: “such a lever, it is loosely controlled gambling”. After that, he didn’t ban it. But he thought it should all be a bit more transparent and with more responsibility.
Gambling is, according to the law, the practice of a game of chance with the aim of making money. In other words, making money by betting on the probability that a certain result will occur. That could be the chance that you immediately have an Ace and King in Blackjack, that the roulette ball lands on a red number or that the lottery falls on your zip code. Knowledge of the game is irrelevant. No more than playing according to a system or using a strategy. The outcome of the game remains based on probability. Buying shares of a company in the hope that its price will rise (or fall) is in that sense just as much a gamble.
Relationship or not
There is no long-term commitment to gambling in a casino. If we have won or lost enough, we can walk away from the roulette table or the slot machine. After our bet and any winnings payout, no financial relationship with the casino remains. This also applies if the payout takes place later, such as when playing online. When an investor buys shares in a company, a relationship is created. The buyer becomes co-owner of the company with his shares. Because of the relationship he enters into with the company, he has, in principle, some control over the business operations. That way he can influence his chances of winning. When the investor sells his shares, the relationship is over.
Interests and the customer
Having shares in a company is sometimes also formulated as ‘having an interest in a company’. Buying stock is a business transaction between a buyer and seller, where they intend to benefit both. They have a shared interest. The company can make investments and make a profit from the sale of products or services to its customers. The investor may receive interest and dividends. He is betting that the company will make a profit and he will earn it when he sells the stock again. The investor is not the company’s customer.
Knowledge plays a role in the odds of winning in both casino games and investing. A beginner may bet on red at random and buy a share in a recommended company. The player and investor with knowledge and more experience will make an assessment based on more data. Undoubtedly, knowledge plays a less important role in casino games than in investing. In roulette and blackjack, it is probably the combination of knowledge and gaming experience that improves the chances of winning. After all, this allows for more sensible use.
No guarantees or memory
However, in casino games such as ‘play88 casino‘, lotteries, and investing, knowledge has no influence on the outcome. It is not without reason that stock traders say that past results are no guarantee for the future. That looks like a warning referring to the gambler’s fallacy. Basically, some gamblers think that the next outcome is a result of previous outcomes. That, for example, after a few reds in roulette, black should be or not. But the roulette ball has no memory. So no one knows what the next turn will bring. And that is also the case with the gamble on the falling and rising of prices.
If you put money on the counter at the bakery, you get a loaf of bread. With gambling, you take a financial risk. When gambling, even when it is called speculation, the question is whether you will get anything back for your stake. Depending on the casino game, you can lose everything or go home with a limited loss, limited profit, or big profit. With shares, when you are at a loss, the only advantage you have is that you can possibly hold them until better times. The risk perception therefore differs. When gambling in a casino, the outcome of your deposit is known within minutes. With investment, it usually takes much longer before you know whether you have made a profit or a loss.
The rules of the game of most casino games and lotteries are easy to understand. By playing you increase your playing skills. In addition, you may read and learn something about strategies and systems to increase your gaming pleasure. A player can trust the organizations behind the casino games and lotteries. They are generally large organizations that have to make a profit in order to exist. They need to acquire customers and keep customers coming back. If customers don’t come back, for whatever reason, they don’t earn anything.