Investing or gambling?

“An investment is simply a gamble in which you’ve managed to tilt the odds in your favor.” – Peter lynch.

INVESTING OR GAMBLING ?

The first question before investing in any asset is – Have you learnt the basics?

Do you know the rules of valuation and decision making? Do you know the potential of that asset and the risk you’re taking? If you have committed money to something which you don’t know, realise that you are gambling. When you do a lot of research and put your money in assets that would make you rich after a long time, you’re investing. Investing is a good thing to do.  That’s a positive step. The odds to win are in your favor. On the other hand, when you gamble, you’re putting your money in something which is considered to be a ‘hot asset’. It may give you gains. But, the risk you take is very high. In most cases, such assets would be in an overvalued state and you might end up buying at higher rates. In short, odds-to-win are not in your favor.

Some other positive aspects of investing are that

  • It’s done with specific goals in mind –for e.g.-buying a home.
  • It’s a continuous effort. You put in your money not once but several times after a lot of study and effort and wait for thing to be favorable to you.
  • It’s a long process and results are achieved after a lot of hard work and analysis. It’s not by luck.
  • Investors achieve their targets by taking risks, positively.  They take risks in a very calculated way.

As opposed to all this, gambling or speculation is not done with specific long term objectives.  Money is put into any asset recklessly without analysis. They rely on luck and if they win they get what they desire-an instant gratification. This negative aspect of gambling can sometimes become addictive too.  This is not to say that investing is not addictive. Surely it is. Warren buffet and our own Rakesh jhunjhunwala are definitely investment addicts. Getting addicted to something positive is a good thing. It has no side effects! But, gambling is definitely a problem to be rectified. It has many side effects. People lose millions, wealth of families has been wiped out, and many have ended their lives due to loss from gambling.  I know many stock market players who jump into F& Os even without knowing what they really are or the dangers it can bring.

A lot of so-called investors do not research meticulously and buy on tips or rumors, or based on some analyst’s price target. These guys can also be included in gamblers list. Similarly, investors who make investment decisions purely on the basis of emotions rather than being professional and  sticking with their strategy, are to some extent gambling.

ENTERTAINMENT OR SERIOUS BUSINESS?

Internet has revolutionized the way we buy and sell stocks in the market. With internet, trading is done at the comfort of your home. However, such advancement has also made some section of people addicted to online trading as a form of entertainment. They just have fun playing in the market. While making friends from investing circle, make sure that your friends are serious investors! Or else, it’s not god for your investing future. Hope you’re clear!

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  1. What is the risk involved in investing?
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  3. When should you start Investing?

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