Investing in stock market is not Gambling

Gambling

Investing in any financial product is not easy task and especially if we talk about stock market it requires special knowledge and expertise to earn good return in market.

But if we talk to investors most of investors believe that stock market is nothing but casino and investing in stock market is gambling. According to me this is the biggest myth of investor.

Due to this reason only investors of India, and abroad, do not opt for equity as an asset class as they believe that stock market is for gamblers.

This is not true. Gambling is one way game in which gain of one is loss of other. In gambling result depends on the outcome of throwing a dice. Only one participant will win in gambling. While in stock market, if five investors hold the shares of the same company, and if prices go up, all of them will gain profit.

If you take example of MahaBharata where Yudhisthira & Duryodhana played game of gambling where Shakuni was playing from Duryodhana side. Shakuni was master in this game.

When the game started, Shakuni stoked Yudhisthira’s gambling urges by letting him win a few minor victories. At later stage, Shakuni used his skills in the game to good effect, and before Yudhisthira could be persuaded to stop playing, he had already lost all his wealth and kingdom.

So in gambling once you place your money than nothing can be done result will depended on outcome of throwing a dice which is not in your hand.

In above example we can simply say only Yudhisthira was gambling as Shakuni was expert in this game and he was aware of result. Yudhisthira was told by many that you will not able to win this game against Shakuni but Yudhisthira was feeling this is gambling and my luck will allow me to win.

Same thing happen with investor in market when they feel stock market is gambling. They keep on purchasing stock considering that stock market is nothing but gambling and one day he will be fortunate enough to win the game. But that one day never comes.

Please understand stock market is not Gambling or not Luck game. Stock market needs time, patience and some fundamental skills, which is not gambling.

Stock Market Basic Steps:-

In order to understand stock market basic steps let’s take example of thief. Doing theft is art and thief is master in it. He always plans before doing theft. He does not believe in luck. The way thief is working same way people has to follow steps in trading. Thief takes following steps while doing robbery.

Step:- 1 Deciding place where he want to do robbery.

Step:- 2 Doing analysis of the location/house where he want to do robbery. He keeps on observing things like how many persons are living in home what are their activities, timings etc.

Step:-3 Doing risk reward analysis meaning he will estimate that if he tries this robbery what is risk involves and what will be his reward.

Step:-4 Deciding time of Theft.

Step:-5 He goes for robbery. He takes his partner and keeps him outside of house. He tells his partner that if he feels something is wrong just informs me once so that I can run away. He does that thing as he believes that although his analysis is perfect situation may change at any moment.

So nothing is depended on luck in above example. If we relate above steps with stock market trading it will be like:-

Step:- 1 Deciding stock for Investment.

Step:- 2 Doing analysis of stock and observing up/down movement of stock. This may be based on technical analysis or may be with other methods.

Step:- 3 Doing risk reward analysis of stock that if I am purchasing this stock today, what upside momentum is left 100 Rs/-, 500 Rs/- and what will be risk associated if this stock does not work according to my analysis.

Step:-4 Deciding time of purchase meaning deciding price of purchase.

Step:- 5 Always make provision of stop loss. Meaning deciding how much loss you can sustain. Although you are genius in stock market but situation may change at any moment and you cannot predict that so you should make provision for stop loss.

So in real life way thief takes steps for robbery same steps are applicable in stock market. Following these steps will lead to success in stock market. But most of people does not understand this and believes that stock market is casino and investing in stock market is gambling.

Remember Investing in stock market is not gambling. Stock market investment is Business.

Article by Raviraj

Hi, I am Raviraj. I am passionate about money matters and finance. I have 10 years of rich experience in the field of financial planning, Investments & Insurance. I have written 850+ article on this blog. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.

Subscribe to Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Leave a Reply

Your email address will not be published. Required fields are marked *