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Investing in the stock market makes you a gambler!

Sunday, June 9, 2013

A friend told me that he found it hard to explain to his parents that investing in the stock market was not gambling. They were always telling him to stop gambling in the stock market. To that, I said that his parents were right. He was shocked.

Why did I say that?


Well, all of us have our own perceptions and, to us, our perception is reality. Remember the story about the frog and the fish which shared a pond? When the frog told the fish that there was a different world outside the pond, the fish didn't believe the frog.

So, I told my friend that his folks were probably not able to understand concepts they had never heard of in their lives unless we put across the ideas in a way that they could relate to in everyday life.

I came up with this:

Try telling them that many rich people got rich through having successful businesses. I think they can understand this. Just give them some local examples which they are familiar with. Breadtalk and Old Chang Kee, perhaps. 

So, if they want to be rich, they could start businesses too and hope to succeed. However, it is probably very risky and most of us do not have the capital, the know how or even the inclination to start our own businesses.

Of course, they could always be partners in a business venture and hope that the managing partners are capable enough to succeed and honest enough to share the fruits later on.

Now, at this point, tell them that the stock market is filled with businesses which they can become "partners" in. They just have to pick the right businesses. Right businesses? Yes, the ones with capable and honest management who are likely to succeed and share the fruits with them.

Well, my friend talked to his parents again and told me that although his parents are still sceptical about the stock market, they agreed that what he is doing seems less dicey compared to gambling. Of course, there is more to investing than what has been said but it is a start and my friend is happy enough.

If you find yourself in the same boat as my friend, you might want to give this approach a try. It could work for you too.

Related post:
Wealth creation in the stock market.

20 comments:

INVS 2.0 said...

Starting a business is a gamble. Working as an employee is also a gamble. We are gambling our fate on the hands of others; the boss, the company, colleagues, etc.

AK71 said...

Hi INVS 2.0,

Hahaha.. See? His parents were right!

Our whole life is a gamble! ;)

seefei said...

By the way what is gambling? Please define before we start labeling doing business is a gambling activity. Why working for people is gambling? I think I am lost here.

The post is great and I fully agreed.

AK71 said...

Hi seefei,

I guess your questions are directed at INVS 2.0 which leaves me the job of thanking you for agreeing with my blog post. Whew... ;p

shuaka said...

How would you introduce yourself , AK to others other than your F/T job ?

1. a full-time investor
2. someone who dabbles in stock market
3. a businessman

Almost 99% of my friends who invest in the share market would go for 1 or 2.

That sets the mind to believe it is not a business , yet.

Perhaps, we need a stimulus of sort, a catalyst to propel the investing community to think as businessmen. Perhaps the government can consider giving us incentives and grants for not setting up brick and mortar , equipment .......

I know I am a businessman with multiple businesses and aim to grow them organically or via acquisitions.
I am always on the lookout for strategic collaboration and good business to acquire.

Have a nice day ahead, Mr businessman!

Marco said...

Hi AK,

Do you consider investing in Ascendas HT? The price has gone to the bottom with estimated yield at >8% per annum now.

TQ.

AK71 said...

Hi shuaka,

It has been said that Warren Buffett is successful as an investor because he thinks like a businessman. It has also been said that he is successful as a businessman because he thinks like an investor.

So, I think the trick is not to think of myself as just an investor or a businessman but as both. ;p

teny123 said...

investing become business if we did our homework, check TA,FA,etc. it become gamble when we just blindly pick up 1 without checking thru it. Business has risky even we have done our homework but it still much much lower if we go to casino

AK71 said...

Hi Marco,

I will need a higher yield for Ascendas HT but for some quirky reasons. ;p

See: Ascendas HT: Am I interested?

AK71 said...

Hi teny,

I know what you are saying. We have to take calculated risks in life to make money and that means not going in blind. :)

INVS 2.0 said...

Seefei, if you embark on something and there is no absolute chance that you can win, it is a gamble.

Starting a business is a gamble, can you say it is absolutely certain that you can make money?

Working for others is also a gamble, can you say your job is an iron rice bowl?

:)

INVS 2.0 said...

Btw, don't get misled by the media and parents that gambling = crime. It is just an overused label to describe something that has no absolute chance of winning, which unfortunately, been used by the law and public to describe illegal activities like underground gambling. But legal ones like 4D, TOTO, RWS/MBS Casinos? :D

Singapore Man of Leisure said...

AK,

A rose by any other name is still a rose :)

I would focus on adjectives like good, consistent, profitable, winning, stable, etc.

Who cares about the nouns?

It's no fun being an "investor" when our track record reveals adjectives like - poor, losing, lousy, inconsistent, etc...

If only we can name or call ourselves to profitability ;)

LOL!

coconut said...

good post AK!

gambling and investment is just a fine line cutting across them, trading, the line is even finer.

as long as you can see the fand line cutting across, the choice is your. worst is that you can't see any line at all.

AK71 said...

Hi SMOL,

I rather not do anything related to labelling, be it with adjectives or nouns. ;)

We are always measuring things, ranking things. Always competing, always comparing. So tiring. I am a lazy guy. ;p

Of course, we can say it is a necessary evil. Wah! I said that?

Forgive me, Father, for I have sinned. :(

AK71 said...

Hi coconut,

Wah, so many lines! Well, if we can see a silver lining in whatever we do, that is the line that matters most. It is about seeing what is positive. No? ;)

coconut said...

whatever we do?? i don't want to get attankle with all these silver treads.

i means it only applies to the game of survival or chance. any other things in life, i'm just a gambler.

AK71 said...

Hi coconut,

I say silver lining. You say silver thread. You see the details in the big picture. You good! :D

seefei said...

I solve the labeling business by just calling myself a gambler. I have put aside a small percentage of my investment capital in a CFD account and buy sell like nobody business. I am gambling this account and no ashame of it.

My other investment is dividend yielding and I am not too particular about their share price. For one who had held capmallasia from $2.00 to $1.10 and come back to $2.20 nothing actually bothers me.

AK71 said...

Hi seefei,

You have attained Buddhahood. Om Amitabha. ;)

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