A Bourse Diary

Thoughts on stocks, speculation and ... life

Monday, November 21, 2005

The Bourse is not Casino

The stock exchange is not Casino, although it is frequently compared with it. Yes, of course - there are aspects of gambling, coincidences, not foreseeable reactions and accordingly very personal luck or misfortune, but at the stock exchange there are also very serious non-gambling elements, which make the comparison with the Roulette table completely inaccurate and misleading.

But, if we remain nevertheless with the Casino symbol, I would say, at the stock exchange one has the choice between the one or the other side of the table - to sit down on the side of the players or on those of the bank.

The bank in the Casino wins - as well known - always in the long run. It's simply statistic probabilities. Only enough capital is necessary to "bridge" the possible streaks of losses. The longer the play however lasts, the bank will come to its profit.

This is the long-term investor at the stock exchange. The shares (and here is the general level of the stock markets meant, represented approximately by the large indices) rise on a long-term basis. Behind it stands the progress of mankind. Apart from the pure inflationary development it is also the real growth of the economy. One needs only enough capital, in order to outlast the bear market streaks and not be forced to sell low.

Oddly, the most investors go to the gamblers' side of the table. There certainly is the chance to win much and quickly (in contrast to the bank, which is winning not enormously but constantly and "safely"). But in the long run the gamblers loose. The roulette ball just twirls the money from the one hands into others and in the end into the hands of the bank.

But enough with this casino symbolic...


At 1:30 AM, Blogger Loi Tran said...

I think the stock market can be seen as a casino or as an investment depending on the individual who purchases securities on the market. If there has a lot of research and proper technique used in selecting a security, then the individual is making an investment. But if the person is buying due to market hype or without proper research, they are essentially gambling.

Also, what's your definition of speculation? I want to know because some people define speculation and investing in their own ways.


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Disclaimer: All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and are in no way intended to serve as personal investing advice and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Readers should not make any investment decision without first conducting their own thorough due diligence. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed.