What is the main difference between investing in stock market and gambling?

Lisha Barta: What is the main difference between investing in stock market and gambling?
Lets say you buy some stocks and after a month or so your money gets doubled. Would you not morally feel bad about the money that you got from stock market without doing a thing? Would you feel it is similar to gambling? Can one say that just because there is some science behind stock market the money that some gets out of stock market is more legit?

Answers and Views:

Answer by Len
Morally bad? Hardly, as I am not a Muslim. forbidden to accept interest fees and the like.

When I make profits, it results from very long, difficult hours of intense study to say nothing of depending upon myself—my intellect, instincts, education and many years of experiencing gained from putting things on the line every single day of my adult life, often at great risk.

I don’t owe a moral debt. There are many others who have benefited through my counsel. I ask for nothing from them as I’m happy to share what I can.

I break no laws, abuse nobody. I make no apologies because there are none due.

Is legitimacy derived of science? That’s like saying I’m guilty unless I can intellectually attribute my success to historically definable means. I give back much more than I receive from others and have no need to explain my moral attributions.

I never gamble anywhere on anything other than on my own intellectual and instinctive resources.

It is patently obvious you operate in a much more restrictive cultural environ.

Len

Answer by Roman
For some the stock market is nothing more than a form of gambling. Those that treat it in such a way more often then not loose big. There is a reason why investors look at earnings reports, predicted growth and use ratios like PR and PEG it helps them predict where a company is going. So with due diligence you can make a pretty good assumption and more importantly make profit. In gambling you can only play the odds so anything you choose is randomized (well unless you card count on a black jack table).

If you would like more info on investing in stock check out: www.thestreet.com

If you would like more info on investing in HYIP (high yield investing program) check out: www.hyipindex.net

Answer by Drunken Hero
With gambling you usually get free drinks. Stock market you just get a free bend-over.

Answer by engage
There is a similarity but it also depends on how you play the game. The longer you play at a casino the more likely you are to lose all of your money. That’s a fact the casino industry is based upon. The house has a slight edge in every game so the longer you play the more likely they are to take your money. The best thing you can do if you find yourself ahead at a casino is to walk away with your winnings. Few people do. They “let it ride” and eventually get wiped out.

With stocks, if you spread your money around through mutual funds or you buy at the individual stocks of at least 10 companies it is incredibly unlikely every company would go bankrupt and leave you with nothing. Time is on your side in stocks. Markets may be volatile but the long term trend is upward. Of course, there are things you can do to make things worse. If you panic every time the market drops and sell you are hurting your returns. Likewise, if you wait until the market rallies before buying back in you have already missed the big gains and risk losing money if the market drops – and you panic again. This is “buying high and selling low” – the exact opposite of what you want to be doing. But lots of people fall into this trap. That’s why experts tell you to build a diversified portfolio and resist the temptation to tinker with it other than to occasionally rebalance if your asset allocation drifts from your plan.

Remember that when people talk about how the stock market gains an average of 8 to 10 percent a year they are talking about a long term average. The market rarely returns 8 to 10 percent in any one year. It’s far more likely to go up 20% in one year and be flat the next. And the long term trend is for one negative year out of every five. The three consecutive years of declines in 2000-2002 basically made up for the ridiculous winning streak stocks had been on since 1982.

Answer by Horace
In the stock market, you are buying into a company. How that company does determines your gain or loss. There is an element of ‘gambling’ involved, but the more you know about the stock market and the more you know about the company, the less of a chance you are taking. Rather, you are investing your money for someone else to use in their business and then you either share in the profits or share in the losses.

Gambling, in terms of casinos, etc., is extremely different. What you are doing is hoping other people will lose so you can get some gain. You are not buying into anything and what you get is not an earned profit but a windfall or a loss — usually on pure chance, but against a stacked deck statistically.

In short, when you invest in stocks, you are hoping the people you are involved with will win, because that way you win, too. In gambling, you are hoping the people you are involved with will lose so you can have their money.

For me, personally, the difference has a very ethical and moral ingredient in it.

Answer by pamphlet
is that with gambling, wealth isn’t really created. It’s just money trading hands.

With investing, the net effect is that companies are given money to invest in activities that can be productive. With a stock market, wealth is created through investing by accelerating industry or what have you.

In Vegas, the house always wins. But with stock market investing, a good company generates and distributes wealth. Even though the whole system works on supply & demand (of stock… injecting the primary risk of investing) and there’s a built-in pyramid scheme effect inflating stock prices (and worsening the effect), you still can’t deny that many of these companies generate a lot of wealth, and the wealth has to go somewhere!

The only moral ambiguity that I see would be in investing in sin stocks like Phillip Morris (Altria) or in foreign stocks where you believe that you’re supporting the economy of an generally unprincipled nation.

As for comparing investing to gambling, it really depends on how you do it. If you randomly throw money around, then, yes… you are gambling. Gambling by definition is to partake in game of chance (that is, pure random luck)… and if you pick stocks at random, you are indeed gambling. But if you research and play the game properly, you aren’t technically gambling, by definition of the word.

Is the money more legitimate? As I don’t see either as illegitimate in any way, I don’t imagine that either is more or less legitimate than the other.

Answer by chalkboard
In most gambling, you are at a numerical disadvantage, and only luck determines if you win or lose – most of the time, you lose. In investing, an intelligent, diligent investor can consistently make a profit with a carefully chosen and researched portfolio of investments. Investing does entail some risks, but these can be minimized, and with intelligent investing, the numbers favor the investor.

You are mistaken if you believe that you get money from the stock market, “without doing a thing.” Investors who consistently make money need to do research, paperwork, and accounting. Picking random stocks might not be any work, and that really is gambling, but it isn’t really investing. Real investing means keeping track of how the market is performing, reading trade magazines and newspapers, researching the stocks you want to invest in, learning about market conditions, and a variety of other things. A good investor needs to have a lot of knowledge and a do a lot of work.

You seem to have an idea that the stock market is somehow immoral, or that the money people earn from stocks should make them feel bad. This is not the case. In fact, investing in the stock market is a beneficial thing for a lot of people, and for the economy in general. When you invest in a stock, you are effectively loaning that company your money, so that they are able to better do business. Companies sell stock in order to raise money to buy new manufacturing plants, hire new employees, research new technology, and any number of other business ventures. Investing in stocks gives an average person the ability to help a company grow.

In return for your investment, you hope that the company will continue to do well, which will make the company worth more money, and will in turn cause your investment to be worth more. Some companies actively encourage investors by paying out a dividend to people who buy their stock.

So while there are risks involved in stock market investing, it is not the same thing as gambling. Gambling is giving your money to a casino or lottery and hoping that against all odds, you might win more back. Investing in the stock market is researching companies which you would like to support, and watching them do well enough that your investment returns you more money than you put in. There certainly isn’t anything to be ashamed of in that.

Answer by iffley
Well, it’s more than that…

Technically, an investor puts his money INTO a company to help it grow and expects to receive profits from that investment over time. Since most investors don’t put their money directly into the company, but rather buy the shares on the open market, this puts most people into the speculator mode. Either way, the main difference it time. The longer you gamble, the more certain your loss. The longer you invest (especially in index funds), the more certain your profit.

Answer by M
Stock market is a liquid asset market where you can find buyer for most of the liquid stocks in plenty if you want to get cash by selling your shares it will be done immediately if you want to sell of your house or property you will find some difficulty to get actual price of your property as it will be a one big deal with one investor but for shares you can sell your entire quantity to many investors at one go. And it’s reflecting a mirror of a country’s economic growth