The first thing I often hear when people learn that I’m an investor is that’<\/p>\n
“Isn’t that just glorified gambling?”<\/strong><\/em><\/p>\n Fed up of constantly explaining why it isn’t, I decided a blog post was necessary.<\/p>\n The main reason why many think that investing is a form of gambling is because they don’t know the difference between trading and investing.<\/p>\n What’s trading and what’s investing? These individuals aren’t interested in ‘value’. Conversely, they are obsessed with a range of complicated ‘charting’ methods and trends that they believe will identify stocks\/currency\/commodities that will increase in value*.<\/p>\n They then purchase the stock\/currency\/commodities and seek to sell them at a higher price*.<\/p>\n Investors\u00a0<\/strong>(such as myself) have no interest on the stock’s immediate trajectory. It could drop in value, or rise in value.<\/p>\n Instant capital appreciation is not the aim of an investor.<\/p>\n I, like many other investors, seek to purchase physical stakes in companies that I intend to hold forever for a reasonable price.<\/p>\n When I purchase shares in McDonalds, I own a slice of McDonalds. Sure, this stake is small – but it’s real.<\/p>\n This is markedly different to ‘trading’ because Traders seek to hold their purchases for a limited time and have absolutely no intention of holding their stake for its underlying value.<\/p>\n If their purchase drops below a certain price (their stop-loss), they’ll sell their purchase and realise their loss.<\/p>\n conversely, investors doesn’t lose anything as they will always retain their stake in a company.<\/p>\n Sure that stake may increase or decrease in value. But it’s always there (bar bankruptcy of course!) The fact is: If one classifies investing as ‘gambling’ then, simply, any form of ownership would be gambling.<\/strong><\/p>\n Is purchasing a house a gamble?<\/p>\n Your house could increase or decrease in value, but you still keep the house regardless, right?<\/p>\n The only problem would be if you purchased a house purely for capital appreciation but then sold it if it dropped in value! This is what traders do (crazy if you ask me).<\/p>\n The reason I invest is to constantly increase my wealth through owning physical stakes in the world’s most succesful companies.<\/p>\n In return, these companies reward me with a dividend income.<\/p>\n *Traders also identify stocks that will decrease in value in order to ‘short sell’ the stocks.<\/p>\n","protected":false},"excerpt":{"rendered":" The first thing I often hear when people learn that I’m an investor is that’ “Isn’t that just glorified gambling?” Fed up of constantly explaining why it isn’t, I decided…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/330"}],"collection":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=330"}],"version-history":[{"count":0,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/330\/revisions"}],"wp:attachment":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=330"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=330"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=330"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\n<\/strong>Traders<\/strong> will buy stocks (or currency, or commodities) with the intention of selling them at a higher price.<\/p>\n
\nSimply put, traders ‘gamble’ on a purchase moving in a certain direction. If it moves in an opposite direction they lose money where investors purchase an asset.<\/p>\n