Some people will tell us we shouldn't buy shares, because gambling is immoral. But investing and gambling are poles apart.
Leaving aside the morality question, is investing in shares really the same as gambling at all? Let's look at a few examples…
Open all hours
Think of any corner shop, perhaps run by a friendly old chap (let’s call him "Arkwright"), selling all sorts of goodies at often unearthly hours -- the kind we would be lost without. Now, would you think of that shop owner in the same light as a regular at Gamblers Anonymous?
I expect you wouldn't, because running a shop is just a business, and we wouldn't really consider it in the same moral category as gambling.
Now what if that shop is successful, and old Arkwright wants to expand his business and open another shop, but doesn't want to go it alone? Suppose he offers you a chance to join him, injecting the cash needed for expansion in return for half of the business. You think that's a good plan, and so you end up with two shops, owned 50-50.
Would that make you a gambler? You're taking a risk, but again, I don't think many people would lump it in with playing the lottery.
Expansion
Now lets advance a number of years, when the firm of 'Arkwright & (Insert your name here)' has gone from success to success and owns a chain of shops, and you both decide you want to sell off some of your business to raise cash for a comfortable retirement. So you sell, say, half of it to new private investors. Are those new investors gamblers? Are they doing the same with their cash as putting it on a 20-1 outsider at Chepstow? I can't see how they'd be any different from the original owner who started up the business.
Flotation
Eventually, the owners of the firm might want to raise more money for further expansion, or make it easier to sell some of their share of the company as and when they might need some cash. So you all decide to go public, and 'Arkwright & Associates PLC' is incorporated and floated on the London Stock Exchange.
Individuals then buy and sell Arkwright shares, a discussion board for the company is opened on The Motley Fool, analysts start publishing their tips, and who knows, the company might even get a mention in Champion Shares!
What's the difference?
"I can't buy Arkwright shares, because gambling is immoral", some might cry. But what is the difference between owning all of Arkwright's corner shop and owning a small portion of Arkwright PLC? And where do you draw the line? Does a sole ownership constitute investing, but a two-person partnership is gambling? Or does it become gambling when the partnership expands further? If so, just how many shareholders does a company have to have for it to become 'gambling'?
I don't think any of these questions make sense, and owning a part share in a large company is no more gambling than owning an entire business yourself.
Two distinctions
I think there are two main differences between investing and gambling. For one, gambling is what is known as a zero-sum game, which means that you can only win what someone else loses, and I can understand moral objections to that (even if I don't necessarily share them).
But making money from investing in shares does not require someone else to lose money, and that is because the companies you are investing in actually generate new wealth from their business operations. It is, in fact, entirely possible for every single company on the stock market to generate profits and for nobody to lose (unlikely, I know, but possible).
And if you do lose money by investing in a company that performs poorly, that's really no different from your corner shop having a bad year.
Psychology
The other difference is really just a state of mind. If you invest for the short term, betting on which shares will go up today and which will go down, and if you're more interested in following the lines drawn on a share price chart than understanding your company's business performance, then I think you are probably in danger of being classed as a gambler.
But if your attitude is to approach buying shares as actually taking a stake in a company that you would like to own for the long term, and from which you want to take honest profits generated year after year, then I think that's a country mile away from gambling -- it's doing your bit to maintain this great nation of shopkeepers of ours.
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