Most people, especially none investors and even investors believe that investing is gambling. That is why there are always highs and lows in the stock market, because majority of stock investors believe in throwing a dice, picking a stock based on intuition and hoping that it goes up.

Now to be honest with you, there are a lot of gamblers in the stock market posing as investors or traders. However, I will be doing my best to draw a line between these two terms. Even though both involve risking your capital with the hopes of future profit, stock investing and gambling have major differences that set them wide apart. So, if you have been in support of the common myth that investing in the stock market is in no way different from gambling at the casino, this post will help clear that off your mind.

Now what is the difference between stock investing and gambling?

How is a gambler different from a stock trader since both risk capital based on speculation? Below are 10 major factors that distinguish stock investing from gambling:.

Both stock investing and gambling involve the simple principle of minimizing risk while maximizing profits. But how this principle adopted varies in both practices. While stock investors consider diversification across different investments as the strategy for minimizing potential losses, gamblers look into the risk capital to risk reward ratio and would only put in their money if the odds are favorable.

The concept of time is another key difference between stock investing and gambling. Gambling is a time-bound practice, but stock investing can last several years. In gambling, once the game or hand is over, your chances to make more profit from your wager are closed.

Difference between Gambling and Stock market | Money and Matters

But in stock investing, you have good chances of making more profit as the years roll by. Returns from dividends are a key component to making money in stocks over a long period.

Stock investors can prevent total loss of their risked capital if the market starts to turn sour and there are no hopes of a positive turnaround. Investors have certain options to help them prevent undue risk this way.

What is the Difference Between Gambling and Investing? - icoqerum.web.fc2.com

For instance, if your stock drops by a certain percentage of your risk capital, you can stop your investment and sell that stock to someone else. But in gambling, you cannot set stop losses on your bet. If you bet that a team will win a soccer match and that team loses, you cannot get any part of your money back.

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So, gambling prevents people from minimizing their loss. Both stock investors and gamblers adopt various strategies in order to boost their chances of winning. One of such strategies is careful analysis prior to risking their money. In stock investing, you analyze trading patterns by interpreting stock charts. This will help you predict what will likely happen in the market in the future. It is known as technical analysis. You can also choose to research the company you want to invest in.

This is known as fundamental investing. In gambling however, you analyze the mannerisms and betting patterns of your opponents. This information may be all you need to make a well-informed decision and predict the likely outcome of a bet.

Of course, information is very necessary in both stock investing and gambling.

But while information about companies such as earnings, financial ratios, etc. But in stock investing, your money starts working right from the moment you put it in. So, you will hardly get back the exact amount you invested; even if you decide to withdraw your funds. If you have invested funds in stocks in different companies, you can confidently claim to be an entrepreneur an investor. Even if you have no other business to run, your funds will keep working for you.

In fact, in some places, gambling is looked at with contempt.

But in gambling, there are no economic benefits, as you are not investing in any company. But in stock investing, the more you trade with various companies, the better your chances of making profits.

This is because stock investing allows you to stop your losses. Although some gamblers claim to be skilled at analyzing the likely outcome of a placed bet, this is usually an empty claim. But you can have a seasoned stock investor.

What's the difference between trading stocks and gambling? | Yahoo Answers

In other words, with the right research, you are very unlikely to lose in stock investing. But in gambling, experience is rarely is helping factor. So, while gambling is just playing by hazard, trading stocks is about understanding market trends and cycles and taking advantage of them.

Top 10 Difference between Stock Investing and Gambling. Which is the Best.