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Why investing in shares is not like gambling

Share values are extremely volatile over short terms.

In other words, they go up and down a lot over the course of a day, month or even, sometimes, a year or three.

So, it’s a “gamble” to invest in shares if you’re in it for a quick gain.

However, if you remain invested in a spread of companies for five to 10 years, or more, it’s as far from gambling as chalk is from cheese.

Gambling is a zero-sum game

If you lose at the casino, “the house” takes from you and gives nothing in return.

No value is created.

When you invest in the stock market you’re buying pieces of companies.

You become the owner of the companies’ assets and share in their profits.

When share values fall

When the value of a share you own falls, you’re not left with nothing.

You still own the same proportion of that company (admittedly one that is worth less than before) and next month (or year) the stock might be up again.

You still share in the profits.

Tata ma chance

Stock market investors, or their fund managers, don’t just randomly chuck their money into an investment.

There might be some uncertainty regarding outcomes in the short- to medium-terms, but you're not simply hoping that luck is on your side.

Long-term values are not volatile at all

Sharpeville, the Soweto Uprising, sanctions, the State of Emergency, the Rubicon Speech, Boipatong, early 90s unrest, energy crises, multiple recessions, war, financial crises and so on and so forth…

Yet, have a look at the chart below.

The value of shares over longer-terms is not volatile at all.

It’s not gambling if you’re 90% sure you’re going to win.

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This article first appeared on 702 : Why investing in shares is not like gambling


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