Comments on: Is Investing in Individual Stocks Merely Gambling – Or Something More? http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/ Simple, applicable personal finance advice for the modern world Mon, 15 Mar 2010 04:41:42 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: Cathy Braun http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-327711 Cathy Braun Mon, 14 Jul 2008 16:49:15 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-327711 Count me in the "stocks are gambling" category. I was looking at options for my 401K and I just could not shake the feeling that I was gambling. I opened up a Roth IRA with CD options instead. I'm actually kind of glad that I was in debt for most of the housing boom period, so I wasn't investing anything. All of my current assets are cash. I am going to leave it that way until there are signs of life in the US economy. Count me in the “stocks are gambling” category. I was looking at options for my 401K and I just could not shake the feeling that I was gambling. I opened up a Roth IRA with CD options instead. I’m actually kind of glad that I was in debt for most of the housing boom period, so I wasn’t investing anything. All of my current assets are cash. I am going to leave it that way until there are signs of life in the US economy.

]]> By: Michael http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-312066 Michael Wed, 25 Jun 2008 12:58:42 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-312066 There is a distinction that can be made between trading (gambling) and investing (strategy). Traders are more like poker players, while investors ressemble chess players. This article might interest readers: http://www.helium.com/items/1090714-understanding-the-difference-between-investing-and-gambling There is a distinction that can be made between trading (gambling) and investing (strategy). Traders are more like poker players, while investors ressemble chess players. This article might interest readers: http://www.helium.com/items/1090714-understanding-the-difference-between-investing-and-gambling

]]> By: George http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-219389 George Wed, 02 Apr 2008 06:23:32 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-219389 I realize everyone is going to start throwing stuff at me for saying this. . . but , frankly, the stock market is like gambling. To much speculation. And many people who give advice about brokerage accounts have a conflict because they get paid commissions every time trades are made. That being said, Google stock is down due to a decline in ad sales. Seems like with a recession, a lot of markets are dropping. I realize everyone is going to start throwing stuff at me for saying this. . . but , frankly, the stock market is like gambling. To much speculation. And many people who give advice about brokerage accounts have a conflict because they get paid commissions every time trades are made. That being said, Google stock is down due to a decline in ad sales. Seems like with a recession, a lot of markets are dropping.

]]> By: anonym http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-218387 anonym Tue, 01 Apr 2008 12:50:34 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-218387 i'm wondering why you all agree that index funds will go up in long term always. on the one hand there can be a really long period where they go down and it takes a lot time to get into positive range again - maybe too long for some of us. and second: it's always cited "the history shows that in long term the share market gives high return", but this misses the fact that the financial markets changed heavily during last ~10-20 years. 20 years ago stock market was done by a view traders in real trading rooms. today hedge fonds, direkt brokers, realtime charts for everyone, internet, ... capital globalization have changed everything and predictions can imho not be made by looking into past. i'm not that negative, but a bit sceptic.... i’m wondering why you all agree that index funds will go up in long term always.
on the one hand there can be a really long period where they go down and it takes a lot time to get into positive range again – maybe too long for some of us.
and second: it’s always cited “the history shows that in long term the share market gives high return”, but this misses the fact that the financial markets changed heavily during last ~10-20 years. 20 years ago stock market was done by a view traders in real trading rooms. today hedge fonds, direkt brokers, realtime charts for everyone, internet, … capital globalization have changed everything and predictions can imho not be made by looking into past.
i’m not that negative, but a bit sceptic….

]]> By: Writer's Coin http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-218285 Writer's Coin Tue, 01 Apr 2008 10:56:30 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-218285 I don't like to see individual stock investing being called straight out gambling like that, but I understand where you're coming from—I own only index funds except for two stocks. For people that are invested in over 8–10 stocks, I doubt they have the time to properly keep tabs on all of them. But still, it's not gambling. Sure, nothing is 100% in terms of picking out winners, but nothing in life is. There is some serious money to be made on individual stocks. I don’t like to see individual stock investing being called straight out gambling like that, but I understand where you’re coming from—I own only index funds except for two stocks.

For people that are invested in over 8–10 stocks, I doubt they have the time to properly keep tabs on all of them. But still, it’s not gambling. Sure, nothing is 100% in terms of picking out winners, but nothing in life is. There is some serious money to be made on individual stocks.

]]> By: alasdair http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217731 alasdair Mon, 31 Mar 2008 21:33:57 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217731 "Most forms of gambling that aren’t merely chance, such as blackjack and poker, are games of partial information. You know some of the information out there - the cards you hold, perhaps some of the cards the dealer holds, any revealed cards, and the “tells” that the other players have shown you. At the same time, key pieces of information are hidden - what the others are actually holding." As both a poker player and an AI researcher, I can assure you that poker is not "merely" a game of chance. It's true that poker is a zero sum game, but unlike (non card counting) blackjack, it is possible to have an "edge" in poker that can translate to a greater than 50% chance of making money. If you have a positive "Expected Value" and play long enough, you'll come out ahead. The same thought can, in theory, apply to individual stocks. With enough research (better than the aggregate), you can make money trading. It's hardly a sure thing, however. “Most forms of gambling that aren’t merely chance, such as blackjack and poker, are games of partial information. You know some of the information out there – the cards you hold, perhaps some of the cards the dealer holds, any revealed cards, and the “tells” that the other players have shown you. At the same time, key pieces of information are hidden – what the others are actually holding.”

As both a poker player and an AI researcher, I can assure you that poker is not “merely” a game of chance.

It’s true that poker is a zero sum game, but unlike (non card counting) blackjack, it is possible to have an “edge” in poker that can translate to a greater than 50% chance of making money.

If you have a positive “Expected Value” and play long enough, you’ll come out ahead.

The same thought can, in theory, apply to individual stocks. With enough research (better than the aggregate), you can make money trading. It’s hardly a sure thing, however.

]]> By: Derek Wong http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217715 Derek Wong Mon, 31 Mar 2008 21:18:48 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217715 Definitely think that this is a controversial post. But it is very in line with what I believe. For me personally, I don't care to spend the amount of time to truly get invested into a company. But I will freely believe that the general stock market is on the upswing. It's similar (but also markedly different) from roulette where you can either wager on a particular number or on black or red. However in my case, I'm betting on everything going up rather than going down rather than on a particular stock/number. Okay similar but also very different. Best analogy I could think of. Definitely think that this is a controversial post. But it is very in line with what I believe. For me personally, I don’t care to spend the amount of time to truly get invested into a company. But I will freely believe that the general stock market is on the upswing. It’s similar (but also markedly different) from roulette where you can either wager on a particular number or on black or red. However in my case, I’m betting on everything going up rather than going down rather than on a particular stock/number. Okay similar but also very different. Best analogy I could think of.

]]> By: Gayle RN http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217652 Gayle RN Mon, 31 Mar 2008 20:29:03 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217652 You were indeed gambling, Trent. You did not have a plan. You saw something shiny, bought it, but you didn't really know what it was made of. Investing in individual stocks is hard work requiring discipline. When I find a likely candidate for purchase I have a formal written checklist that I have to go through. This helps to organize that mass of information. After that I run a series of calculations to figure out a purchase price. After purchase I put in a stop order to prevent massive losses from unanticipated events that I have no control over such as 9/11. Selling discipline is even more important than buying. For me, the work has been worth it. The more you do it the easier and faster it gets. You were indeed gambling, Trent. You did not have a plan. You saw something shiny, bought it, but you didn’t really know what it was made of. Investing in individual stocks is hard work requiring discipline. When I find a likely candidate for purchase I have a formal written checklist that I have to go through. This helps to organize that mass of information. After that I run a series of calculations to figure out a purchase price. After purchase I put in a stop order to prevent massive losses from unanticipated events that I have no control over such as 9/11. Selling discipline is even more important than buying.

For me, the work has been worth it. The more you do it the easier and faster it gets.

]]> By: George http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217616 George Mon, 31 Mar 2008 20:02:11 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217616 Trent - The reason you liken your stock experience to gambling is that you weren't investing in stocks, you were trading in stocks. Trent -

The reason you liken your stock experience to gambling is that you weren’t investing in stocks, you were trading in stocks.

]]> By: Phil A http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217609 Phil A Mon, 31 Mar 2008 19:57:03 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217609 Is it gambling if you buy shares of a well established company and hold those shares for 35 years? Is it gambling if you buy shares of a well established company and hold those shares for 35 years?

]]> By: ongrowthtrack http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217591 ongrowthtrack Mon, 31 Mar 2008 19:34:58 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217591 Trent, Did you have an exit strategy when you invested in those stocks? (I don't think so) Why didn't you buy less number of stocks? It would have still given you the engagement with the individual stocks without loosing sleep over the dropping price. Trent,

Did you have an exit strategy when you invested in those stocks? (I don’t think so)

Why didn’t you buy less number of stocks? It would have still given you the engagement with the individual stocks without loosing sleep over the dropping price.

]]> By: Phil A http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217590 Phil A Mon, 31 Mar 2008 19:33:07 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217590 What about bonds? Which is better-buying individual bonds or bond funds? What about bonds? Which is better-buying individual bonds or bond funds?

]]> By: Coyote http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-217542 Coyote Mon, 31 Mar 2008 18:40:44 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-217542 I have been spending a little bit of time lately listening to and talking to professional investors. And what I have come away from it is this: For the professional, making money in the stock market (or Forex, or Real Estate, or what have you) is EASY. The trick is knowing how to minimize your losses, which will easily wipe out your gains if you don't know what you are doing. The best solution I have heard for straight-up stock trading is a combination of value and growth investing. Find a company with demonstrated growth in major indexes for the last several years, research its management as best you can, and then buy it at a time when the market seems to be greatly underestimating its value. If a company is growing at 20% a year, its stock value WILL eventually get it right. And if you buy it at half-price, you've got potential for some big gains. Of course, estimating what its real value should be is something of a black art even for the professionals. I have been spending a little bit of time lately listening to and talking to professional investors. And what I have come away from it is this: For the professional, making money in the stock market (or Forex, or Real Estate, or what have you) is EASY. The trick is knowing how to minimize your losses, which will easily wipe out your gains if you don’t know what you are doing.

The best solution I have heard for straight-up stock trading is a combination of value and growth investing. Find a company with demonstrated growth in major indexes for the last several years, research its management as best you can, and then buy it at a time when the market seems to be greatly underestimating its value.

If a company is growing at 20% a year, its stock value WILL eventually get it right. And if you buy it at half-price, you’ve got potential for some big gains.

Of course, estimating what its real value should be is something of a black art even for the professionals.

]]> By: Trey Atkins http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-216811 Trey Atkins Mon, 31 Mar 2008 04:43:47 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-216811 I have enjoyed your web-site over the past couple of weeks and appreciate the work you put into it. However, I could not disagree more with your "buying stocks is gambling" analogy. Why? Gambling results in either a win or a total loss. Even in your example of buying at $32 and selling at $29, you have lost only a little less than 10%. Much better than the typical 100% loss associated with gambling. Trey I have enjoyed your web-site over the past couple of weeks and appreciate the work you put into it. However, I could not disagree more with your “buying stocks is gambling” analogy. Why? Gambling results in either a win or a total loss. Even in your example of buying at $32 and selling at $29, you have lost only a little less than 10%. Much better than the typical 100% loss associated with gambling.

Trey

]]> By: chris http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-216741 chris Mon, 31 Mar 2008 02:39:51 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-216741 You should diversify and buy for long-term (unless you are a day trader). Long-term means at least 5-7 years. Over the long term stocks give you a return above inflation. You should diversify and buy for long-term (unless you are a day trader). Long-term means at least 5-7 years. Over the long term stocks give you a return above inflation.

]]> By: Ryan http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-216717 Ryan Mon, 31 Mar 2008 01:52:47 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-216717 Ugh, that just reminds me of when I was in school, recommending to my Investment Analysis class to buy Apple shares at $16. That was the day before iTunes dropped. My teacher said I was completely wrong on recommending Apple. And now look. Easily over $100. Too bad I didn't have any money in college, or I would've bought some shares. Ugh, that just reminds me of when I was in school, recommending to my Investment Analysis class to buy Apple shares at $16. That was the day before iTunes dropped. My teacher said I was completely wrong on recommending Apple. And now look. Easily over $100. Too bad I didn’t have any money in college, or I would’ve bought some shares.

]]> By: The Weakonomist http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-216712 The Weakonomist Mon, 31 Mar 2008 01:48:58 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-216712 Bill makes a good point. Its difficult to price a company without knowing the ins and outs. Microsoft had been to the Yahoo camp and knew their business before making a (though underpriced) bid. For example: A tech analyst for JP Morgan specializes in Apple (AAPL). This guy has working relationships with manufacturers in China, he joins Jobs on the phone for stockholder meetings. Individual investors don't have this kind of access. Like Dividends, I have some long term holdings in companies that pay money every quarter. I also work with a network of investors. Together, we test investing strategies so that we all use very little capital. Being a finance major, I can't help but test the theories my professors write about. But for 99% of my money, its index funds baby. Bill makes a good point. Its difficult to price a company without knowing the ins and outs. Microsoft had been to the Yahoo camp and knew their business before making a (though underpriced) bid.

For example: A tech analyst for JP Morgan specializes in Apple (AAPL). This guy has working relationships with manufacturers in China, he joins Jobs on the phone for stockholder meetings. Individual investors don’t have this kind of access.

Like Dividends, I have some long term holdings in companies that pay money every quarter. I also work with a network of investors. Together, we test investing strategies so that we all use very little capital. Being a finance major, I can’t help but test the theories my professors write about.

But for 99% of my money, its index funds baby.

]]> By: adam http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-216665 adam Mon, 31 Mar 2008 00:37:09 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-216665 Looking at your investments its no surprise you were disappointed. You invested money in 2 computer/electronics companies, a cyclical, and I don't even know where to put Herman Miller. These are all very very highly covered stocks and they move around a lot based on each bit of news. While its very good to follow the news on a company, it should only be for you to keep up on its story not to follow the price of its stock from day to day. Don't forget this nugget of advice: 'in the short term the market is a voting machine. in the long term its a weighing machine.' I'm not sure why you felt the need to sell these investments unless you didn't believe they were fundamentally good companies anymore. While I like having some money in an index fund, I think its entirely possible to have 5-10 individual investments that you can keep tabs on with less than a few hours a week if you are looking to buy with a fairly long-view of things. Looking at your investments its no surprise you were disappointed. You invested money in 2 computer/electronics companies, a cyclical, and I don’t even know where to put Herman Miller. These are all very very highly covered stocks and they move around a lot based on each bit of news. While its very good to follow the news on a company, it should only be for you to keep up on its story not to follow the price of its stock from day to day. Don’t forget this nugget of advice: ‘in the short term the market is a voting machine. in the long term its a weighing machine.’

I’m not sure why you felt the need to sell these investments unless you didn’t believe they were fundamentally good companies anymore.

While I like having some money in an index fund, I think its entirely possible to have 5-10 individual investments that you can keep tabs on with less than a few hours a week if you are looking to buy with a fairly long-view of things.

]]> By: Dividends4Life http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-216556 Dividends4Life Sun, 30 Mar 2008 21:43:19 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-216556 It is all n how you approach it. As a dividend investor, I take a long-term view and thus do not watch my stocks on a daily basis. the key is selecting fundamentally sound stocks and let it ride. As a dividend investor, i get excited when the market is down because it drives the yield up. That's not to say you can't gamble with stocks. Many do it. Best Wishes, D4L It is all n how you approach it. As a dividend investor, I take a long-term view and thus do not watch my stocks on a daily basis. the key is selecting fundamentally sound stocks and let it ride. As a dividend investor, i get excited when the market is down because it drives the yield up.

That’s not to say you can’t gamble with stocks. Many do it.

Best Wishes,
D4L

]]> By: Andy http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/comment-page-1/#comment-216498 Andy Sun, 30 Mar 2008 20:37:59 +0000 http://www.thesimpledollar.com/2008/03/30/is-investing-in-individual-stocks-merely-gambling-or-something-more/#comment-216498 I use MSN CAPS for a lot of the research help with individual stock buying. There are thousands of players on there who do the research for you and the system works pretty well. I have a 401k and have a little bit of money in index funds, but I do individuals for fun. I think it is a healthy hobby. I use MSN CAPS for a lot of the research help with individual stock buying. There are thousands of players on there who do the research for you and the system works pretty well. I have a 401k and have a little bit of money in index funds, but I do individuals for fun. I think it is a healthy hobby.

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