fbpx

1.3.2 Speculation

You can use shares also for speculation. Then the goal is not to receive a yearly dividend, the focus is on appreciation normally in a short term.. think about a couple of days or even weeks.

 

Speculation and Gambling

How many times during a discussion have you heard someone say, ”investing in the stock market is just like gambling at the casino”? True, investing and gambling both involves risk and choice – specifically, the risk of capital with hopes of future profit. But gambling is typically a short-lived activity, while equities investing can last a lifetime.

Also, there is a negative expected return to gamblers, on average and over the long run. On the other hand, investing in the stock-market typically carries with a positive expected return on average over the long run.

Investing vs Gambling: Key differences

In both gambling and investing, a key principle is to minimize risk while maximizing profits. But, when it comes to gambling, the house always has an edge- a mathematical advantage over the player that increases the longer they play. In contrast, the stock market constantly appreciated over the long term. This doesn’t mean that a gambler will never hit the jackpot, and it also doesn’t mean that a stock investor will always enjoy a positive return. It is simply that over time, if you keep playing, the odds will be in your favor as an investor and not in your favor as an gambler.

You can compare investing as crossing the road: You can cross without looking to the left and right and be their fast but the chance of you getting hit is much higher compared than when you look to the left and right ( so doing your research and spread your investments for example) you will get their probably a bit later but the change of you getting hit is much lower.