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I see the difference between gambling and stock trading as this: Gambling has a negative long-term percentage, but stock trading is the opposite: a positive lon
by zandorg 17y ago
I see the difference between gambling and stock trading as this: Gambling has a negative long-term percentage, but stock trading is the opposite: a positive long-term percentage.
If you gamble at roulette for long enough with any strategy, you'll lost 2.6%.
If you play the stock market for that long, again randomly, you'll GAIN 2.6% (just a made up number - it could be 1% depending on the economy).
Postscript: At stock trading, like in a casino, you have to make enough to cover the "house cut", which is the fees you pay to brokers to sell and buy stocks (in roulette, it's 2.6%).
- amichail 17y agoI suspect most people lose money in the stock market because they need the cash so they may end up selling low.
- profquail 17y agoIt's called Risk Aversion: http://en.wikipedia.org/wiki/Risk_aversion http://en.wikipedia.org/wiki/Risk_aversion
- profquail 17y agoActually...it's a little different. In the stock market, that gain you're talking about comes from investing in the 'market portfolio', which is equivalent to investing money in every single stock on the market. That would be like betting on all of the numbers on the board at once -- because of the payouts on individual numbers, 35 to 1, you'll eventually still go broke. You could easily make back-to-back-to-back-... poor decisions and end up broke, because 'broke' is an absorbing state and most math models assume you're stuck at 0 once you hit 0. See "Martingale" at wikipedia: http://en.wikipedia.org/wiki/Martingale_%28betting_system%29 http://en.wikipedia.org/wiki/Martingale_%28betting_system%29
- radu_floricica 17y agoClose to 20% over many years... at least that was the number before the current crisis. I'm guessing it's still well over 10%.