The Most Authentic Guide on Personal Finance and Investments

(Funny) Words of Wisdom : "My wallet is like an onion, opening it makes me cry." ~ Anonymous

Why investing in equity isn't the same thing as gambling?

Many people consider investing in shares as equivalent to gambling. This, however, is a misconception. There are some significant differences between the two. And only when people appreciate and understand these, can they hope to benefit from equity's wealth-creating potential. 

One Gambling is a zero-sum game. There is only one winner in gambling. If you win, the gambling house loses. If you lose, the gambling house wins.

Equity is not so. In equity everyone can be a winner. You as an investor can make money. Simultaneously, with your money, the company can expand its’ business and win by making more profits. So everyone can be a winner, with no loser in the bargain. This is not possible in gambling.

Two In gambling the odds are heavily staked against you. The chances of you winning are very low. So your winning in gambling is a rare occurrence.

Equity is not so. In equity chances of making money are quite high, if invested sensibly.

Three Gambling gives you some thrill, some excitement and lots of disappointment. That apart, you get to own nothing in gambling.

Equity is not so. With equity you get to own something. You get to be a part of some business. You get to own a possible stream of income.

Four Gambling is mainly a game of chance or luck. No amount of study or skill is going to improve your chances of winning.

Equity is not so. It is a game of skill. You have to do lots of research to identify the right stocks to buy. You have to keep track of the company’s performance. Further, you have to take an informed call as to when you have to book profits and get out.

Five Gambling is essentially a one-time short term event. You buy a lottery, you don’t win, your tear the ticket and game over! 

Equity is not so. It is a game of time. After due research you find a business whose future prospects look quite good. You buy the stock; the business grows with time; it delivers higher profits; the share price appreciates; you sell and make your money! 

Six Gambling simply involves transfer of money from one person to the other. If you win, the money transfers from the casino’s pocket to yours (this, of course, is very rare). Invariably, however, the money goes out of your pocket to that of the casino. 

Equity is not so. It involves wealth creation. Initially the money goes out of your pocket to the company’s pocket. This is productively invested. More profits are generated. And you get your returns. 

By the way, you will make more money and more assuredly if, instead of playing in the casino, you bought some shares of a casino.

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