Do you think investing in stock is same with gambling?
By aliwoen
@aliwoen (72)
Indonesia
14 responses
@plasma (673)
• India
1 Nov 06
Though it's speculative, I think that it requires knowledge and smartness to play this game and also come out victorious. It deals with real companies with real assets. Unlike gambling, it's transparent and has a strict official regulatory body, be it any market anywhere in the world. People are minting money as the returns are surreal, but all of it is associated with some risk, always.
@mandakat (879)
• Canada
1 Nov 06
It is "a gamble" but that is different from gambling.
Gambling involves throwing money into essentially nowhere, and if luck strikes, you get some back.
Investing means providing money to a company that you have researched, and that you believe in, so that they can start up, or grow, and then theoretically take off. Then you make money back.
Having kids is an investment. You spend lots of money raising them, educating them, etc, with the hopes of a return in your investment - love, affection, learning, staying young, being cared for in your old age, knowing you raised caring competent people, etc.
It's "a gamble" but it isn't gambling.
@anup12 (4177)
• India
8 Nov 06
No it ids not at all gambling it is about your current knwoledge of the market,your intelligentce and skill
@vinaykiran28 (5149)
• India
5 Nov 06
yes i think investing in stok is same with gambling because we cannot predict the stock market.........
@Lauralover684 (229)
• United States
5 Nov 06
I think its the same because gambling is just taking a risk with money and your doing the same thing when your investing in stocks thats why you can make so much money.
@philipwu51 (684)
• China
4 Nov 06
no, even gambling need technique, and stock need much more techique, of course, they all need luck.
@raghib786 (358)
• India
5 Nov 06
no i don't think so...stock market is a game which is played only by intelligent people...
let me tell you all about what exactly stock market is all about...
In financial markets, stock is the capital raised by a corporation through the issuance and distribution of shares.
A person or organization which holds share of stocks is called a shareholder. The aggregate value of a corporation's issued shares is its market capitalization.
In the United Kingdom, the word stocks refers to a completely different financial instrument: the bond. It can also refer more widely to all kinds of marketable securities. The term "share" still means the stock issued by a corporation, however.
Type of stock
Common stock
Common stock, also referred to as common shares or ordinary shares, are, as the name implies, the most usual and commonly held form of stock in a corporation. Shareholders of common stock have voting rights in corporate decision matters.
Preferred stock
Preferred stock, sometimes called preference shares, have priority over common stock in the distribution of dividends and assets.
Most preferred shares provide no voting rights in corporate decision matters. However, some preferred shares have special voting rights to approve certain extraordinary events (such as the issuance of new shares, or the approval of the acquisition of the company), or to elect directors.
Dual class stock
Dual class stock is shares issued for a single company with varying classes indicating different rights on voting and dividend payments. Each kind of shares has its own class of shareholders entitling different rights.
Treasury stock
Treasury stock is shares that have been bought back from the public. Treasury Stock is considered issued, but not outstanding.
Application
The owners of a company may want additional capital to invest in new projects within the company. They may also simply wish to reduce their holding, freeing up capital for their own private use.
By selling shares they can sell part or all of the company to many part-owners. The purchase of one share entitles the owner of that share to literally share in the ownership of the company a fraction of the decision-making power, and potentially a fraction of the profits, which the company may issue as dividends.
In the common case of a publicly traded corporation, where there may be thousands of shareholders, it is impractical to have all of them making the daily decisions required to run a company. Thus, the shareholders will use their shares as votes in the election of members of the board of directors of the company.
In a typical case, each share constitutes one vote (except in a co-operative society where every member gets one vote regardless of the number of shares he holds). Corporations may, however, issue different classes of shares, which may have different voting rights. Owning the majority of the shares allows other shareholders to be out-voted - effective control rests with the majority shareholder (or shareholders acting in concert). In this way the original owners of the company often still have control of the company.
Shareholder rights
Although ownership of 51% of shares does result in 51% ownership of a company, it does not give the shareholder the right to use a company's building, equipment, materials, or other property. This is because the company is considered a legal person, thus it owns all its assets itself. This is important in areas such as insurance, which must be in the name of the company and not the main shareholder.
In most countries, including the United States, boards of directors and company managers have a fiduciary responsibility to run the company in the interests of its stockholders. Nonetheless, as Martin Whitman writes:
"...it can safely be stated that there does not exist any publicly traded company where management works exclusively in the best interests of OPMI [Outside Passive Minority Investor] stockholders. Instead, there are both "communities of interest" and "conflicts of interest" between stockholders (principal) and management (agent). This conflict is referred to as the principal/agent problem. It would be naive to think that any management would forego management compensation, and management entrenchment, just because some of these management privileges might be perceived as giving rise to a conflict of interest with OPMIs." [Whitman, 2004, 5]
Even though the board of directors runs the company, the shareholder has some impact on the company's policy, as the shareholders elect the board of directors. Each shareholder typically has a percentage of votes equal to the percentage of shares he or she owns. So as long as the shareholders agree that the management (agent) are performing poorly they can elect a new board of directors which can then hire a new management team. In practice, however, genuinely contested board elections are rare. Board candidates are usually nominated by insiders or by the board of the directors themselves, and a considerable amount of stock is held and voted by insiders.
Owning shares does not mean responsibility for liabilities. If a company goes broke and has to default on loans, the shareholders are not liable in any way. However, all money obtained by converting assets into cash will be used to repay loans and other debts first, so that shareholders cannot receive any money unless and until creditors have been paid (most often the shareholders end up with nothing).
AND THE MOST IMPORTANT OF ALL....
Trading
A stock exchange is an organization that provides a marketplace (either physical or virtual) for trading shares, where investors (represented by stock brokers) may buy and sell shares in a wide range of companies. A given company will usually list its shares by meeting and maintaining the listing requirements of a particular stock exchange. In the United States, through the inter-market quotation system, stocks listed on one exchange can also be bought or sold on several other exchanges, including relatively new internet-only exchanges. Stocks are broadly grouped into NYSE-listed and NASDAQ-listed stocks and exchanges where NYSE-listed stocks may be bought are generally not the same group as the exchanges where NASDAQ-listed stocks may be bought. Many large foreign companies choose to list on a U.S. exchange as well as an exchange in their home country in order to broaden their investor base. These shares are called American Depository Receipts (ADRs) -- or, in the case of companies such as UBS and Daimler Chrysler -- "foreign ordinary shares."
Large U.S. companies also list in foreign exchanges for the same reason. Although it makes sense for some companies to raise capital by offering stock on more than one exchange, in today's era of electronic trading, there is limited opportunity for private investors to make profit on pricing discrepancies between one stock exchange and another. As such, arbitrage opportunities disappear quickly due to the efficient nature of the market.
I HOPE THIS HELPED A LOT...
@classymohit (763)
• India
5 Nov 06
no i dont think so in gambling its just luck where as share market is calculated risk
@redyellowblackdog (10629)
• United States
6 Nov 06
Yes and No! Yes, if you try to day trade or follow hot stock tips. No, if you invest on the basis of knowledge of a company and the current state of the economy.