Stock Market Speculation or Gambling. What is the Difference?
Author: Amy Goodmann
The art of speculating in one form or another has been around forever.
When it comes to speculating, there are always three things that you can be sure ofthere will be always people willing to speculate, there will always be people who will love to play the game with the first group. Lastly history can be counted on to repeat itself.
Sure the object of speculation may change, the rules may change and the technology may change. But in the end it is always the same.
However what has happened before is 100 % sure to happen again. You can count on it. Everyone thinks always that they are so original when it always the same story again and again. Whether it is tulip bulbs, precious metals, mutual funds, lottery tickets or penny stocks human nature is human nature.
Ignorance, greed, fear and hope determine how people react and thus how prices move and markets behave. People have speculated on everything at one time or another,
For the last hindered years and certainly into the foreseeable future speculating on stock prices offers liquidity combined with legitimacy and purpose. Stock speculation, trading and investing have become an essential and vital parts of both our economy and our lives.
Trading is just another word for speculating and investing is nothing more than speculating, except that it supposedly encompasses a longer time horizon and for some odd reason implies less risk. Speculators speculate, trader's trade and investors invest to make money. Traders buy stock or any other object of speculation because they anticipate a price appreciation.
Speculation and gambling are similar, with a few important distinctions. One difference is the perception, sometimes true, that successful speculators profit due to their skill or an unseen advantage, while gamblers prosper due to chance or luck.
Remember though that it may not happen to you but in the end given enough time or chances the odds will always prevail. The casinos in Atlantic City and Las Vegas were not built with winner's money.
Another distinction is that gambling in most forms has been illegal (at least until government got involved and changed the rules in their favor) while speculation plays an essential role in our markets and thus our economy.
These important distinctions make speculating which indeed is what our investment industry purveys as an accepted occupationindeed one with one prestige and gamblers not being accepted in the same light.
Whether a gambler, a trader or a speculator, in all cases the attraction is the samethe chance to make a lot of money in a hurry. It is the immediate gratification of the win that makes these games irresistible - an opiate of sorts.
Indeed problem gamblers have been compared to alcoholics in needing that rush which gives them such pleasure and serves amazingly to release endorphins to relax their troubled minds.
On top of that the unpredictability of the wins serves to even reinforce this addictive behavior.
Not far off of the methods of B.F. Skinner and the rats of operant conditioning fame.
Indeed some people will tell you that 'it will almost always end with crying!'
