Which rewards better: the stock market or gambling?

Question: 

If I split my money into 50-50 piles and put one half on the stock market and if I spend the other half gambling in a casino, then, on a probability basis, which is safer, and which of the two will give higher returns? (from Quora: click here)
  
My Answer: 

If you don't have time to think or research about your investments, then investing in stock markets might seem like gambling. But it is not. No matter how/why you invest - stock markets are a safer bet compared to gambling.

Here is why - in stock markets you own some kind of an asset (not applicable to instruments like Options or their new age cousins, but let's limit this to mutual funds or stocks). You could sell those units/shares in the market at some price. Even if you do make a loss, you have something to show for (unless the stock price plunges to zero, which is a little rare). You can't say that about gambling.

For me stock markets are no different than anything in our day-to-day life. It pains me to see people equating/comparing it with something as unnatural as gambling. Among many things, it solves a purpose in our society. More at: Why the hell do we need the stock markets?


Let's consider - buying a TV vs. buying stocks. While it may not give financial returns in direct cash, it gives its value in other ways (electricity or cable savings could be considered a direct cash impact). There are literally 100s of types of TVs in the market and every one of them offers a different value at a certain price point. There is enough information to consider, if you wish to - refresh rate, pixel aspect ratio, sound quality, apps, accessories, tech support etc... and then of course the prices, discounts in different stores. You could research and decide whether you are getting a bang for your buck ... or you can just go by the brand and forget all the research. Either way, you could buy something "expensive" and be disappointed or be extremely satisfied with something "cheap". You could sell it back to someone or keep it.

The same applies to stock market investments. Among 100s of things, you could compare the PE ratio of a stock vs. average PE of that industry to know whether it is expensive or cheap. A lot of times the "apparently expensive" stock gives you more returns than the cheap one (even though you scored a better price for the cheap stock). So there are no guarantees but the more you research, the more you can get to know it. Plus - you have something to show for and you could sell the shares/units to someone else.

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