Gambling in The Stock Market Essay Example | Topics and Well Written Essays - 2500 words

Gambling in The Stock Market - Essay Example NYSE was used as a platform to trade bonds and stocks. Following the establishment of stock and bond trading platforms, most people view it as a money tree, which creates wealth easy and quick. As a result, many people used their savings to invest in stocks and bonds. However, it is important to note that investing in stock market requires hard work and adequate research because it is unforgiving for amateurs or gamblers. Gambling in the Stock Exchange There are clear distinctions between gambling and investing in the stock exchange as indicated below. Gambling refers to putting money or other valuable assets into activities whose outcome involves chance. It can also refer to an immediate event or act, whose motive is immediate gratification. When the word gambling is mentioned, people easily identify casinos, gaming activities as well as lottery. However, they fail to identify that putting money into the stock exchange to buy stocks, bonds and other investment vehicles with no concr ete and clear goal may also qualify as gambling. Gambling in the stock exchange is not a new phenomenon among many new traders. Gambling can be addictive and destructive at the same time. Gamblers are risk seekers because they go for all or nothing. It is motivated by compulsion or entertainment. Little or no research, risk seeking, unsystematic approach, emotion like greed and fear is evident, motivated by entertainment or compulsion. Gambling is encouraged by introduction of internet enabled online trading making it cheaper and quicker to trade in the markets as well as easier and pleasant access to the market, which is provided by stock tickers and comfortable rooms. Investing in the stock exchange is characterized by long time investment horizon. It is a progressive process aimed at generating progressive net worth. With longer time, the value of stocks bought is likely to appreciate thus enabling long time investors to have higher chances of generating positive results in the m arket. Investment also involves putting money to purchase assets used to produce goods or services or spending in activities that promotes production of goods or services with an aim of making a profit. Therefore, investment involves provision of capital to companies which need to accomplish their goals. In addition, investment is about setting goals of building wealth in the future. Investors are usually risk averse as they try as much as possible to avoid risk unless they will be adequately compensated. Finally, investment is about risk aversion, systematic approach and is done after doing sufficient research. Who Gambles and Who Invests A person who invests in the long time horizon is an investor. Over time the value of the stock market is likely to increase, thus odds work in the favor of the investor. This indicates that the investor may lose money in the short term but gain in a longer time. Furthermore, in the stock market the outcome is not random. If a person takes a delibe rate step to research, and analyzes which stock to buy as well as develop a detailed plan and takes a much longer time horizon, then he or she is said to be an investor because he or she has better chances of succeeding or getting positive results. Doak (45) asserts that real investors invest after a rigorous research, they form their own opinions. Investors know and understand that well run companies will have the value of their stock rise while poorly