While there are obvious gamblers in the world of trading and investing, is there reason to believe that there is a significant difference between legitimate investors and gamblers in the market? To say the least, investing is not always as lucrative or risky as some might think if you buy and hold. For example, dividend investors usually get 3-5% per year and on certain years, their dividends are cut, or otherwise cannot even cover their paper losses. In today’s post, I will be sharing my thoughts on why investors can still stay legit in the midst of gamblers in the market.
Gambling occurs everywhere
The idea of betting to make a quick buck exists in almost every context. For example, giving up an opportunity and waiting for a better one even thought it is not confirmed yet. Otherwise, buying a property at a particular location in hope that the property value will appreciate faster. All of these decisions might have been made by both gamblers and investors but the difference lies in the thought process before arriving at the decision. This sets apart investors from gamblers because investors consider the potential risk more than just potential gains.
Do Investors trade like gamblers?
Following the previous point, it is not the act of buying or selling that makes one a gambler or investor. Certainly, there will always be hope that one will make a sizeable amount of returns in a short period of time. However, there are always tell tale signs when gamblers make a move in the market. Usually, gamblers are more frivolous in their decisions and they often make bigger bets when they buy or sell. On the other hand, investors will always calibrate their expectations relative to the potential risk attached to a particular trade.
How do investors react to gambling activity in the market?
Let’s face it, the market is filled with emotion filled gamblers who are willing to take leveraged and risky positions without fully understanding the consequences of their actions. Inevitably, the market has become a lot more volatile and frankly, quite messed up. In such cases, investors will also have to evolve and embrace greater market fluctuations on a daily basis. Personally, I will set aside funds to buy when panic sellers sell and sell when greedy buyers buy to get a quick profit whilst holding on to another significant chunk of the same stock. The rationale behind this is to maximise profits from my positions since the markets are trending with more ups and downs in recent years.
Closing thoughts
In conclusions, there will always be gamblers in every market and investors are also constantly learning how to profit from the markets whilst maintaining their original intentions. That said, I would say that it is a slippery slope when you are unsure of your own stance as a player in the market. It is true that everyone aims to profit off the market, however, how we decide for the long term will still determine our role in this space.
