Investing vs gambling
Investing and gambling are two different things. Investments have a specific aim and goal in mind. What is the point of my investment? is it for wealth building, or to save up for a big money purchase? Or maybe it’s for retirement planning. Investments have a sound structural and fundamental framework underlying it. How do I want to invest? How much do I want to invest? Many would consider dollar cost averaging. What should I invest in? This can range from investing in individual stocks to investing in thematic ETFs to ETFs tracking the market (e.g. S&P 500). There is sound statistical evidence showing that staying invested in the stock market in the long run will generate better returns than other ’safer’ financial instruments like bond returns, fixed deposit returns etc. Here I would like to make a distinction between investing and trading. A trader is not an investor. A trader tries to beat the market through short term buying and selling of stocks/funds. While there are definitely patterns in the stock market, these patterns are fleeting, and appear and disappear very quickly. It could be months, weeks, or days when these patterns emerge and fade. Unless I’m a quant with extensive knowledge on how to identify them, there is no way I will be able to predict the movement of markets consistently with more than 50% accuracy. In essence, I’m gambling that the stock I buy will go up because I think it will. Some people might get lucky and earn, but then I would go to the crypto market to do that. Hence for those who take enjoyment in trading, I personally believe in having fun with trading, but trade within my means. Just my one cent worth of thoughts.
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