Thursday, April 25, 2013

Stock Market - It is Gambling! It's not Gambling!

"Stock market?"
"Wait we're not allowed to get into stocks. It's gambling! Isn't it right?"
As an LDS living in the Philippines, this is what I usually hear when some of my fellow church members would hear about engagement in the stock market of another. 

When I first heard about the stock market it wasn't explained to me like it was explained in the first paragraph above. It was explained to me this way by my grandpa: When I buy shares of stocks of a company, I become part owner of that company. And that the company I am a part owner of, can give me dividends that will serve as profits. When the time comes, I may sell your shares of stocks and make more money. I can buy more stocks also to get more shares. That way I will be contributing investments to the company that I buy. I will allow the funds I contribute be taken care of by the company's bigger boss(Board of Directors etc...) and it's employees. The business runs without me having to be actually there. I become an investor!

As I grew up I began to attend a company seminars that teaches more about stocks and other financial stuff. I began to realize that I want to study more and invest more stocks for my future and children's future. Very excited, I went to my dad and told him about the idea. He laughed and said that I can't join the stock market because it's gambling. 

Though it may seem like it, I don't mean to put my dad in a bad light here, he's been a good dad to me. His idea of things sometimes is more dominated by fear than by really trying to understand the all the logic behind it. Just my thought...
Anyway, let's get back to the topic. Is stock market really gambling or not? My answer is, it depends! 

First off, let's make this simple. Investing is the word used by businessman and entrepreneurs when they are trying to build a company that they'd want to stand through time. So when a person invest, that simply means that it has to be long term and not a fly by night activity, or a one time event. There is home work to be done, such as proper company research, and forecast about a company's projects etc... 

Let's define gambling. Gambler is the word we use for people who are just trying to make their bets through luck. This usually happens in a casino or when we... say, buy a lottery ticket.You go into a casino, to try your luck, you can either win or not, the same thing with lottery. Though you don't know if the numbers you pick will win, you still try your luck, and speculate on choosing what numbers might win. In short, if you are just speculating, then you are gambling.

Now, wanna get into stocks? Let's place some guidelines: 

1. When we want to invest in the stock market, we make sure we do our homework. Also, we must remember that businesses needs to take time to grow.

2. Time and not timing is our ally there. If we withdraw too soon then that is our loss. If you want to invest and consider yourself an investor, make it long term.

3. Sometimes, some investors forget the real essence of investing into the stock market. They would get into the stock market today and then tomorrow they sell their shares, and never come back, and consider themselves investors already. They made one trade and then never again, and then they'd tell you that stock market is gambling! 

4. If investing is our goal, we do not buy businesses that we do not understand. This way we can keep constant investment to companies that we can benefit from for a long time. 

Just because it's high yield and doesn't mean it's gambling. Simple as that! Otherwise, go gamble and good luck with that!

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