Buying Shares Is Just Like Gambling?

Buying shares is just like gambling?

Well… It CAN be like gambling if you want it to be.

If you want to put a copy of the FT on the wall and throw darts at it, then yeah, gamble away.

You CAN gamble on pretty much anything.

But it’s just that, a gamble.

Bet on Shergar in the 2.10 and they either win/lose and you’ll get paid or lose money after the race. One go, one bet, one chance. There’s potential to place bets on many things to ‘diversify’ your betting but they are still a win/lose for a direct endpoint.

There’s a reason why most professional gamblers won’t buy a lottery ticket, there’s no way of affecting the outcome or the odds, no matter what you do. Most professional gamblers study a lot, they study form, conditions, all sorts of things and in that way, it’s less of a gamble and more of an educated guess that the odds are worth placing against.

Shares are different for many reasons. You couldn’t lose 50% of your money in six months on a horse then gain 200% back over 4 years. One big difference in investing is that you have to buy or sell to ‘crystalize’ your win/loss as there’s no specific end point other than what you set as the limits to your investing. If you’re up 100% you have to sell to realise the money or continue to hold hoping for more. Likewise with losing, you either take the hit or hold on. It is possible to face death by 1000 cuts in investing. A share can dwindle downward for a long, soul destroying time, until you’re down 99%+.

Analysts and the whole of the finance sector are in a way similar to the professional gamblers, they have the instruments, the insight and the knowledge to better place money where it has a chance to build in dividends and profits. Like gamblers there’s no real certainty, but there’s an educated guess. However, as another difference to gambling they hedge with a variety of instruments and methodologies to create lots of chances for their money to grow should one or more fail.

In an ideal world you’d know about everything, so could make educated guesses about anything you wanted. You’d have an understanding of the difference firm ground makes on the race or geo politics would make on a share. Sadly it’s pretty hard to filter all the noise out to get to what’s actually pertinent to making a profit. So you’d look to specialists whose job it is to be in the know, and you’d latch onto what they do, learning, educating yourself and understanding the methodology. This saves time, energy and, ultimately, costly mistakes. Though a portfolio goes up as well as down, in the end, you’d want to be up.

That's what HindeSight has been doing for years, educating people about investing. Our track record is transparent, our methodology is clear for all to see.

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