Respond to my classmates post: Playing the stock market is like gambling. Such s

Question

Respond to my classmates post:

Playing the stock market is like gambling. Such speculative investing has no social value, other than the pleasure people get from this form of gambling.

“Gambling is a zero-sum game where one’s win is dependent on another’s loss. A zero sum game can have anywhere from 2 players as in chess or ping pong up to millions of players as we see in the lottery or casinos. Gambling is never a win/ win or lose/lose situation because one mans/women’s lose is another’s win.

In terms of the stock market, one invests in it they don’t play in it and this is inherently different than gambling. Shares of a company are more than just a trading venue, they actually represent ownership in the company in which the holder is entitled to a claim on the assets as well as a portion (however small) of the profits.

In the article “The Five Biggest Stock market Myths” Investopedia.com sums up the difference between gambling and investing in the stock market by first stating that with gambling, no value is created, it simply is the act of taking money from a loser and giving it to a winner. In contrast, investing in the stock market increases the overall wealth of the economy. When we invest in a company we are investing in the future growth of that industry as well as making opportunities for employment for those that work for the firm.

The Five Biggest Stock Market Myths http://www.investopedia.com/articles/02/061902.asp#ixzz3lqVhy1w7

Explanation / Answer

I totally agree with the fact that Gambling and investment in the stock markets are two different things. Gambling takes place without any fair idea of what could happen shortly whereas the same couldn’t be said about Stock markets as along with speculation, there is a fair amount of analysis and calculation involved to figure out whether or not, one needs to invest in a stock. While gambling is purely based on uncertainty , stock market investments are governed by pure expectation. While one may think that market could go up and hence, makes the investment, the other might be pessimistic about market and as a result, may sell off his investment. Hence, the overall movement of market is based on the premise of underlying expectation and not on the basis of complete lack of judgment which plays a pivotal role in Gambling. Apart from that, as rightly said, investment in a growing company adds to its value and prepare it financially to exploit various opportunities which could come its way in near future. This will result not just in rise in its potential but also lead to other benefits like rise in employment, salaries & other amenities which will end up helping the nation as a whole in terms of wealth creation and progess.

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