Is Investing in Stocks Gambling? No, Investing Isn’t Zero Sum

The stock market is not a game of chance like at a casino or racetrack; it’s a place for investors to make money by buying stocks when they’re low and selling them when they’re high.

Is the Stock Market Gambling?

Investing in stocks isn’t like gambling because there are rules for investing that can lead you to have higher returns than keeping your funds in cash.

Why Stock Investing is Not Gambling

Stock investing is inherently different from gambling for a number of important reasons. Below, we walk through two of the biggest differentiators between gambling and stocks.

→ Stock Represents Ownership

First, stocks represent ownership in a company or venture. Unlike gambling, stocks are an investment that provides an individual with a stake in the company.

→ The Value of a Company Drives Its Stock Price

The value of the stock can be worth more or less than what you bought it for at any given time, but, over enough time the value should converge on the net present value of the company’s expected future earnings.

How is Investing Different from Gambling?

→ Perceived Risks and Zero-Sum Game

Undoubtedly, both investing in the stock market and gambling at the casino involve risk. In both situations, you need capital, otherwise you can’t participate. Where these two activities differ comes with the risks taken on and how much they can tolerate.

→ Ability to Limit Losses through Risk Mitigation Strategies

Another difference between investing and gambling comes from the ability to limit losses through risk mitigation strategies. In effect, closing out a position or buying insurance in the form of options.

Swipe up TO KNOW MORE ABOUT Is Investing in Stocks Gambling? No, Investing Isn’t Zero Sum