How are stocks gambling? I just don't get it.?

Question

You are buying a company NOT betting it all on red 13. Buying a stock is no different than buying a small business, flipping a house, etc. It may work out or not. I'm just sick and tired of ignorant people putting down stocks especially women and their money market/ CD fetish ( then we wonder why most women can never afford to retire even ones that worked all their lives....5% isn't going to cut it especially after inflation and taxes). I mean what are the odds of WB, BAC, GE, JNJ, NYX and countless of other cash machines with solid business going down under? Hell I just don't get it why people think like that? What do you think?

Answer 1

You are right, and you are wrong. If the last five numbers were black and 13 hadn't been landed on in the past 10 hours, I might be tempted to bet heavily on red 13--but properly practiced, stocks are nothing like that. But, as with the casino, people do stupid things smartly and smart things stupidly.

I've bought into solid companies, with solid books of business and a solid set of books, but it wasn't what the market was interested in at that moment. I remember buying Intel at one time, Corning at another, and while both at their prospective times had much good about them, I happened to buy at virtually the high of the year. They fell, and fell, and fell. News was getting scarse, and what I heard was good, but still the stock kept falling. I thought perhaps that something dismal was about to happen, so I sold--at nearly the low for the year. Twice burned, I was tempted to say it was a wager, but I know better (although I still don't quite understand why they took their big slide, to this day). If I had held out, in both of these two separate cases, it would have taken almost two years to fully recover what I went in with (although holding out on the first would have kept the remaining money from being lost on the second).

Many people, however, trade stocks, and trade them actively. Past performance is not an indication of future results, so there are times when, as I have done in other things than these previous two examples, I have substantially double-digit results in one year--and feel like a genius--then I royally stink the next year and feel like the idiot I probably am.

In short, we are often guessing, hopefully with educated guesses, as in substance behind our conclusions, but even well-reasoned estimates are simply estimates. That is the element of gambling. Sometimes, as Enron and Tyco illustrate, we think we have something when it really isn't there. That too, like planting corn heavily but no rain comes, is part of the gamble--sometimes books are in need of restatement, sometimes books are outright frauds, but most are as honest as the day is long. Which ones? That is part of why people call stocks a gamble too.

Finally, we exaggerate a lot. We exaggerate in our choice of words. We exaggerate our firm estimation of the future value of a stock we buy. We even exaggerate the meaning of words like invest, and gamble.

Answer 2

i'll give you the medium answer.

The market operates in cycles and you have to be up on world events to really see it. The dollar is at an all time low vs teh rest of the world therefore foreign investments are up. The commiecrats in Washington wants socialist medicine meaning big pharma sector is a don't buy (especially if their Queen gets her fat ass in the white house in 08). The commies are also against big oil and profits meaning alternative energy MAY be a play but high yield dividend paying stocks will be a thing of the past in 2010 (unless the good guys keep the White House and we kick out the commies in 2010). The sub prime mortgage is in trouble which means financials be wary.

This is why i keep hawking on diversification what is hot today will not be tommorrow. WB and BAC are in the same sector you only need one. GE JNJ are solid plays but be wary of NYX.

Answer 3

You've got the right idea. When you buy a stock (besides penny stocks) you are putting money into a business with assets. If losing money were the only definition for gambling than almost anything you put your money into is a gamble. The only reason you cant lose money in a bank account is because the government insures it, up to 100 thousand. Put more than that into one account and I guess you're gambling because you could lose it if the bank fails. Brokerage accounts are insured up to 500 thousand. Thats if your broker fails, not if your stocks fail. Or in government securities because the government can print money, and their is an illusion of trust. Investors own equity. They own the casino. Gamblers are dependent upon odds. They are the customers of the casino. They have no equity. They own nothing. I get tired of this too.

Answer 4

Because you can lose money. I invest 100% in equities but I have lost many thousands and after the Dot.com bust I am not up to what I had in 1999 in one portfolio.
It is always a gamble but it is a good bet, average returns are 10-12% and you have more than 50% odds of making more than money in the bank.
I didn't know women had money martket or CD fetishes so can't comment on that. I had a one year CD once for 2,000 but took it out to buy stocks when it matured.

Answer 5

Dont forget the "bubble" or worse, the Great Depression. Those were hard learned lessons that cost people their entire life savings. It is a gamble to put your money in the stock market. You lose money as well as make it. Research helps, as you alude, but it is no guarantee. Let others take the risks they are comfortable with, and make your own best choices. At the end of the day, he with the least indegestion and most money wins.

Answer 6

It's been only a few decades since the massive suicides in 1929 when the stock market crashed.

Perhaps in 2029 that urban legend will be in oblivion.

To this day, many people won't buy Mercedes Benz.

On the other hand, "Fanta" is very popular everywhere.

Who knows what the people will forget in the future?

Answer 7

Who cares? If they're stupid that just means that intelligent investors who practice discipline and reasonable asset allocation will end up with a big basket of money when it's time to retire and the non-investors will still be working.

When that happens you'll have more money than 95% of Americans and you'll be set.

All you do when you try to educate them is let them in on the secret.

Answer 8

It isn't truly gambling like roulette, but referring to it as a gamble helps remind everyone that investments can and do lose value. Keep in mind, you used gambling terminology yourself. You asked, "what are the odds...".