Is the Stock Market Gambling? (Complete 2022 Guide)

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By Forrest | Last Updated: February 25, 2022

If you're new to investing, you might be wondering if investing in the stock market is gambling. After all, it seems too good to be true, right?

You put your money into the market and it grows exponentially.

In this post, I'll explore if the stock market is gambling, some of the best ways to start investing in stocks, and much more. Let's get started.

Is the Stock Market Gambling

Is the Stock Market Gambling?

When it comes to investing in stocks and the market, it can be easy to see how it could be considered gambling.

But is it, really?

The truth is, if you have a well-diversified stock portfolio and you're investing for the long term, your chances of succeeding in the stock market are almost guaranteed.

On the other hand, if you're looking to make quick money by day trading stocks without much experience, this could be equivalent to gambling. 

Below are the reasons why stock investing isn't necessarily gambling. Because gambling by definition requires three components, you can understand why it isn't gambling.

Is it Repeatable?

One of the main reasons to tell if something is gambling is if it can be consistently repeated, or if it is completely random. This is known as chance.

When it comes to stock trading, if you can build a well-diversified portfolio and invest in the long run, it's possible to repeat the results of many past investors.

With gambling, it's not easy, or possible, to produce consistent results.

Is there a Stake?

Both gambling and investing in the stock market require a stake of your money.

This is also called consideration.

Is there a Reward?

Both the stock market and gambling offer a reward or prize.

With stocks, your reward is the potential money you could make when you sell shares.

When gambling, your reward is the money gained from your victory.

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Invest Safely

Is Day Trading Stocks Gambling?

Day trading, or trading stocks throughout the day, can have significant risk and can be considered gambling by many investors.

With day trading you'll trade many times within the same day. Because the stock market fluctuates throughout the day without much logic, this can be closely associated with gambling.

One losing trade and you could lose a large amount of money.

Related: How to Make a Living Trading Stocks

Is Options Trading Gambling?

Options trading is a form of stock trading that involves trading an underlying asset of a stock rather than the stock itself.

With this form of investing, investors can have access to another asset class to help with risk management.

So, is options trading gambling?

Options trading is not too different than normal stock trading. While many options trades are made as a bet against a certain stock – they can be used wisely to limit losses on some trades.

Ultimately, options trading is not necessarily gambling as long as you have a sound strategy in place.

Related: Can You Lose More Than You Invest in Stocks?

Is Forex Gambling?

Forex, or foreign exchange trading is another type of investing that some investors will use to mitigate risk.

With this form of investing, you'll trade currencies in the case of one currency outperforming others.

Forex can be considered gambling in some instances because it is more difficult to predict the future and geopolitical risks that might be in play.

Stock Market Fundamentals

Stock Market Fundamentals

One of the largest reasons the stock market is not always gambling is because of the underlying fundamentals behind it.

A stock is actually a small portion of a large company. This means that by owning a stock, you essentially own a portion of a company's profits and assets.

And while owning a company does involve risk, there are principles and strategies you can use to increase revenues and make money.

Another key fundamental of the stock market is the flow of information. As opposed to gambling, where you only have access to a small subset of data, there is a plethora amount of information surrounding stocks and other investments.

For example, you can use analytical skills to analyze stock charts, measure company performance, and much more.

Related Reading: Can Stocks Go Negative?

Not Every Investment Strategy is the Same

There is one key component when determining if investing in stocks is gambling: your strategy.

For day traders and people who buy and sell stocks throughout the day purely on speculation, this is more likely to be gambling.

Because you may not understand if the value of the stock will increase or decrease you could lose money rapidly.

Another way you could potentially be gambling in the market is by investing for the short term. Market volatility can have a massive impact on stock prices.

Analyze Risk Reward

Taking calculated risks is essential to optimize your returns in the market without losing money frivolously.

When stock trading it's important to understand how much risk you're taking and the potential for your trade to be successful.

By only looking at the potential reward, you could lose money quickly. 

By only looking at the risk, you could miss out on large returns.

Any successful trader will understand how to value a stock so they can invest and make a profit.

Related Reading: Why Are Equities Volatile?

How to Start Investing for Financial Security

Getting started investing in the stock market is easier than you might think. Below are the steps to start investing for your future.

Open an Investment Account

The first step is opening an investment account. My favorite platform is Acorns. You can get $10 to invest completely free with the link below.

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Opening a brokerage account will require you to be at least 18 years old and you'll need to provide some basic information.

Once your account has been created, you'll need to deposit funds into the account so you can start making trades and investing in stocks.

Create a Strategy

True investing can take some time to nail. It's wise to consult a financial advisor if you're a novice investor to get off on the right foot.

When making investments you'll want to consider a variety of factors like:

  • Risk tolerance
  • Time horizons
  • Amount of money to invest

To avoid gambling in stocks, you'll want to create a strategy to diversify your holdings.

Wait

Patience is key when it comes to investing in almost all financial markets. Many experienced investors know how important time is when it comes to your finances.

By investing your money for less than 1 year, the odds are less in your favor and your “investment” is more like gambling.

By investing for more than 2 years, your investments have a much greater chance of being profitable. This means they are even less like gambling.

Many investors claim you should be investing for 10+ years. In this scenario, your investments are extremely safe and hardly considered gambling.

Safe Investments

Best Safe Investments to Grow Your Money

Below are some safe investment options for both experienced and novice investors.

Well-Diversified Stock Market Portfolio

If you want to start building wealth without having a massive risk tolerance, investing in a well-diversified stock market portfolio is a safe method.

But what does a safe investment look like?

Just because an investment might be safer than others doesn't mean it can't drop in value. Every investment involves risk of some sort.

Because stock prices fluctuate daily, it can be seen as a relatively risky investment. However, most stock investors know that time is your biggest asset and stock trading has delivered results over the long term.

There are many different ways you can choose to invest your money in the stock market. Between individual stocks, mutual funds, ETFs, or index funds – there is no lack of options to be found.

This can scare some new investors away – but investing in the market can be as easy as you make it.

By choosing to invest in index funds, mutual funds, or ETFs, you can have a well-diversified portfolio that limits risk and removes gambling from the equation.

Don't forget to claim your free $10 with Acorns below!

Invest in Real Estate Assets

One of the keys to developing a well-diversified portfolio is leveraging a variety of asset classes including real estate.

While real estate alone can be an extremely powerful tool on its own, by having a portfolio of different asset classes you can limit your ability to lose money.

There are several methods you can use to invest in real estate – each with there own advantages and disadvantages.

For example, using crowdfunded real estate through platforms like Fundrise is an excellent way to get started investing without needing a fortune to get started.

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However, if you're looking to optimize your returns and make more money, purchasing a rental property might be a better option. This will require more money and more work, but you can also have stronger returns.

Another real estate investing method is through REITs, which are traded opening on the stock market. These investments are relatively low risk because they own many different assets to diversify their holdings.

Consider Investing in Businesses

Did you know you can invest in a business outside of the stock market?

With platforms like Mainvest you can invest in a small business with just $100. This can be a great tool for many investors to optimize returns.

Investing in a small business will come with more risk than other options, but your returns could be tremendous.

With Mainvest you can invest in small businesses with as little as $100. It's completely free to join and there are no fees. Just pick the companies you want to invest in and watch your money grow!
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Disclosure: This link is an affiliate link, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

Invest in Precious Metals

Precious metals like gold, silver, and platinum are tangible investments that are a great way to store your money safely.

While the returns on these assets don't tend to be lucrative – they can be used to aid with risk management for your portfolio.

Invest in Bonds

Bonds tend to be some of the safest investments you can find. Just like with precious metals, the returns tend to be lackluster – but they are a great tool to reduce risk.

There are many different types of bonds that investors can consider. To minimize risk, government bonds are likely your best option. These are extremely safe and can virtually only fail if the entire country unravels.

High Yield Savings Accounts

High yield savings accounts are a simple way to store your money relatively safely while generating some returns.

This is a great option for investors who are nearing retirement and need somewhere to store their money without much risk.

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Invest Safely with CDs

Certificates of deposits (also called CDs), are another great method to store your money for the future without much risk.

Interest rates on CDs tend to be low, but should be considered if you're looking to store your money.

Final Thoughts on Gambling and Investing

Having a long term approach to your investment strategy is key if you want to avoid gambling in the market.

If you have a well-diversified portfolio that takes a disciplined approach to trading, investing in stocks is not gambling and the odds are in your favor.

However, if you're investing for short-term potential gains or you tend to take on significant risk by trading too frequently, this can be very closely associated to gambling.

Forrest is a personal finance, entrepreneurship, and investing enthusiast dedicated to helping others obtain life long wealth. He owns several different blogs and is also passionate about health and fitness.
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