This post was most recently updated on November 26th, 2021
Investors must know that the stock market is not gambling, and a novice shouldn’t think that way. Equating the stock market to gambling is indeed a myth that several people on the internet and television pundits have perpetuated for many years, and it isn’t true at all. While investing and gambling tend to have few similar characteristics, they are pretty different. And suppose you don’t take trading stocks or buying shares of mutual funds seriously and make it similar to gambling. In that case, you are indeed in serious jeopardy of losing money or missing out on gains from the stock market that you need for retirement.
Many investors debate that investing in the stock market is just like gambling at a casino, and several investors who tend to believe they are not investing but simply gambling in stocks claim that investing is not the same as gambling. Gambling is quite similar to investing, as it’s a game of chance. But there are several differences between gambling and investing.Under stock market courses, one can see the differences.
Stock is ownership:
You need to know you are purchasing ownership in a company when you buy shares of common stock and have part ownership of the company. It means with every SIP investment; one is earning more money. As one has the right to claim on the assets, debts also including a small fraction of the profits made by the company. In the stock market, to yield more returns, you must understand the company’s profitability and growth potential. To estimate profits, you need to gauge all the metrics, including stock charts, news, rumors, company metrics, and fundamental analysis of the organization.
Value of the company:
It can be challenging to identify the value of a company’s stock price and determine the future value of an organization. Many variables influence the movement of the short-term cost of a company’s stock, and several investors tend to believe these variables are random, but they aren’t in reality. Ideally, the company’s stock price determines the present value of all profits that the company is likely to earn in the near future. But the share price is expected to be volatile and keeps fluctuating. But the stock price of the company says a lot about the actual value of the company.
Trading is all about facts and figures:
You will learn under stock market courses that it is challenging to determine the nature of the market, but traders can also get access to a database of numbers and data to fall back upon. One can always depend on the price trends in the market and scrutinize how the advances and declines are progressing in the market. It is all about research as compared to speculating when it comes to the stock market.
Trading is a game of both skills and discipline:
Trading is all about the game of skills, which requires discipline and knowledge of fundamentals, and it is way different from gambling as under gambling future is mainly dependent on a spinning wheel in trading, it all depends on technical metrics including charts, trends, and patterns that makesdecision making easy for traders.
Zero-Sum Game: ideally, gambling is a zero-sum game, and the strategy allows casinos to sustain in the long run, but trading in the Indian stock market is way different from a zero-sum game. If one abides by essential discipline and trading rules, the money coming back to their pocket is more consistent as compared to gambling.
Mitigating loss- In gambling, one cannot limit their losses, but they can surely do in the Indian stock market. It is one of the significant differences between gambling and stock trading, and you can control losses by minimizing the risk factor.
Time factor- Ideally, both in gambling and stock market, investment time factor is quite different as gambling is said to be a time-bound event while investing in stocks of a company is an event for a long time, like for years. Once the game is over, one’s opportunity to profit from their wager has come and gone under gambling while one can either win or lose, and it is way different from the stock market investment because here traders can earn returns based on their risk.
Control Over the Outcome- When it comes to controlling the outcome, one can be more reliable on the Indian stock market as compared to gambling. Under gambling, one has limited control over the results, and it is a game of probability that mainly works only if the odds are in their favor. But being a trader, one is likely to have a lot more control than a gambler. Hence another crucial difference between gambling and investment is better to control the outcome.
Above all, one can get their hands on plenty of information when it comes to the Indian stock market to earn more profits, but one doesn’t have an idea what happened at their casino table one hour ago. Before investing, one needs to make a thorough analysis of these elements with stock and company information available in the public domain, and it is undoubtedly impossible when it comes to gambling.
Hence there are some differences between investing and gambling.