When we hear the term equity investment, some people have the impression that it’s like gambling to lose or gain.
However, there is a big difference between equity investment and gambling.
What is gambling in the first place?
Gambling is the competition for money and goods in competitions and games and some casinos have promo codes such as ddc codes. Gambling is prohibited by the gambling law in Japan except for some cases. In other words, in a broad sense, you can think of a game like gambling if you lose the game. The essence of this is that “you bet money on competing for the game and decide the profit and loss based on the result of the game.”
Types of gambling
There are several types of gambling, but one that is recognized as gambling in Japan is “public competition”. For example, horse racing, bicycle racing, and boat racing are public competitions. Pachinko and slots are legal games, not gambling, but they are essentially gambling. Outside of Japan, there are many legal gambling activities such as casinos and bookmakers, which even Japanese people can participate in.
Zero-sum games and minus-sum games
There is a “zero-sum game” in the way of thinking about the mechanism such as economy called game theory. SUM is the sum or sum. A zero-sum game is a system in which the sum of those who have increased and those who have decreased money is zero.
Is Equity Investment Gambling?
So, given the above example, is equity investment gambling? The bottom line is that equity investment is not gambling. Equity investment can be speculative or investment depending on the method, but if you buy stocks for investment purposes, this is a very different property from gambling.
The difference between investment and speculation
Investing means giving money to a potential investee for the purpose of making a profit. Speculation, on the other hand, means spending money to make a profit from the difference due to market fluctuations. Day trading, which repeats buying and selling stocks while looking at charts that fluctuate from moment to moment, rather than the original value of the company, is speculation.
Equity investment is a plus-sum game
Earlier, I explained about zero-sum games and minus-sum games, but when it comes to equity investment, it can be said that this is a plus-sum game. In this respect, it is very different from gambling. This is because the profits of equity investments are not contributed by the losses of others, but by the profits and performance of the company. In theory, anyone who holds a stake in a growing company can profit. Of course, there may be a loss depending on the timing of individual buying and selling, but if profits and business performance grow, the total assets of the company will increase in the long run, which is a big difference from gambling in a system that competes with others. You can see that it is different.
What is the original stock investment?
It seems that many people are misunderstanding because the story that they made a lot of money or lost a lot of stocks is conspicuous, but the stock investment is within the range of the investment amount that they contributed, except for margin trading. There is no loss beyond that. You can further reduce your chances of losing money by paying attention to the following:
- Invest in stocks in the long run
When you think of stock investment as an act of investing in a company with growth potential, it is not a good idea to be too conscious of ups and downs from a short-term perspective. This is because short-term fluctuations are extremely difficult to predict. - Diversify and invest in stocks
One thing to keep in mind when investing in stocks is to diversify your investment destinations. This is because if there is only one investee and the company causes some problems and the stock price crashes, it will cause a big loss. By making diversified investments, even if one of them crashes, it will not cause a big loss, and stable asset management can be performed. - Learn reproducible know-how
Everyone is a “beginner” when they start investing in stocks. However, looking around, there are millions and tens of millions of people who have experience in stock investment all over Japan and around the world. It is no exaggeration to say that the starting line is completely different between starting with knowing the know-how created from the experiences and successful experiences of these people and starting without knowing it. It is very important to learn reproducible know-how to achieve results before you start so that you can invest in a well-founded way rather than investing in a gambling-like way.
