Is Stock Market Investing Gambling?

I will answer the question above with another question:

If I place a bet with a 99% win rate, is that considered gambling?

In the eyes of the majority of Vietnamese people, stocks (and even forex or crypto) are viewed as a game of luck. They believe that if you participate and make a profit, you are simply lucky. If you participate and lose money, you are nothing more than an unlucky gambler. Consequently, people often equate the stock market with a giant legal casino.

I view things a bit differently. I believe that "playing" stocks (including forex or crypto) carries aspects of both investing and gambling .

On the gambling side, these are market participants with minimal financial knowledge and virtually no risk management skills. They join the market wishing to get rich quick. They hope that through some stroke of luck, Mr. Market will grant them the favor of winning a huge fortune. Heartbreakingly, among thousands of stock tickers (or coins/tokens and forex currency pairs), the probability of selecting a deal that multiplies their account many times over is extremely low (not even accounting for market timing). If compared, the probability of winning a lottery ticket might even be higher than investing this way.

Conversely, on the investing side, these are market participants with deep financial knowledge and strong risk management capabilities. They join the market seeking to sustainably grow their wealth over the long term. They hope that the deals they thoroughly analyze will help them win big with a low risk of loss. This group's probability of winning is very high because they deeply investigate investment opportunities before actually committing money. Therefore, if they lose, they lose small. But if they win, they win big.

Thus, investing in anything can be considered gambling if you do not understand what you are investing in (even investments that are considered very safe and familiar to Vietnamese people, such as bank savings, gold, and real estate).

Conversely, gambling on anything can be considered investing if you clearly understand what your bet is and balance its risk/reward ratio.

Investing and gambling is indeed a harmful misconception among investors.

To conclude this article, I would like to quote a few great sayings by Warren Buffett on this topic:

"The more you learn, the more you earn."

"Never invest in a business you cannot understand."

"Risk comes from not knowing what you are doing."

Thank you for reading my article!

Kim,