What Is The Difference Between Stock Market Investing & Gambling?

Many people opine that they refuse to invest in the stock market as they are not comfortable gambling with their finances. The origin of this thought might have arisen due to the involvement of high risk in both these cases. Gamblers can invest everything to either win or lose the entire value.

6 Major Differences Between Stock Market Investment and Gambling

1. Research Vs Luck

Stock market investment is research-based, while gambling is luck-based To create a healthy equity portfolio, you need to possess sufficient knowledge of the industry, study the trends, follow the market closely and then invest after thorough research. It is not a matter of luck. You have to properly assess and research to understand the targets, financial situation, and risk involvement for rightly investing in the right assets. Gambling, on the other hand, does not require thorough research or rational judgement. It depends on your reckless emotions during the game. If you are not doing your proper research before investing, then stock market investing might appear like gambling to you as well. In reality, investments are quite the contrary.

2. Ownership

By investing in the stock market, you get part ownership of the company that you invest in. For example, if you buy 5 stocks of Company X (which has a total of Y stocks), you become 5/Yth owner of the company! However, in gambling, it is considered an expense or a profit, without any sense of owning a financial asset.

3. Investment is long-term; gambling is short-term

Financial investments help fulfil goals and aspirations usually reserved for future security purposes, whereas gambling can only fulfil the short term thrills of playing with money.

4. Investment is less risky than gambling

The concept of gambling is entirely based on the level of risk-taking. The result of this risk involvement can rip you off or gain you significantly. Moreover, there is little chance of getting back the money you have put into gambling, and once you lose, you lose it all. In contrast, you can always switch investments from one stock to another. You can incur huge losses in investment as well, but, unlike gambling, it is not a one-time story. Markets can turn, and you may be able to recover your losses if you can hold the investments for a longer term. Alternatively, you can also book your losses and rebalance your portfolio if the stock doesn't perform as per your expectation.

5. Investment is target-oriented

Proper financial investment involves accurate target-based assessment. You can save for education, marriage, retirement, medical purposes, insurance, etc. However, gambling is never future or goal-oriented. Decisions in gambling are taken in an adrenalin rush! It is usually never planned ahead of time with proper research and stakes.

6. Gambling is addictive

Gambling results in addiction, whether you win or lose. If you lose once, you keep the game going. You aim for more and more wins. There is nothing such associated with an investment. It is considered a result of wise financial planning and practice.

Conclusion

From the above discussion, it is evident how gambling differs from stock market investment. Gambling is far riskier than a financial investment, as it is uncertain and entirely luck-based. However, you must keep in mind that all kinds of financial investments are research and result-based.