Is Investing on the Stock Market Gambling?

A popular conception about the stock market (or plural, stock markets) is that investments are tantamount to gambling. Gambling of course shares many of the principles of good investing, and while they are alike in many ways, dealing with investments on a fluctuating market is not gambling. The reason it is not gambling is because there are predictable methods to investing and gaining in the stock market, while even the best gambler takes tremendous risk in what amounts to be a zero sum situation.

The misconception that the stock market may be a zero sum game may actually not be such a big myth. While investors and financial gurus like to say that investment enhances the economy, makes companies grow, help to raise capital and a lot of financially tuned mumbo jumbo, the proximate situation is somewhat different. Agreed that long term investments in a corporation that booms over its corporate history would be truly improving some sector in the economy, but the reality is that most endevours (or positions) in the stock market last for months or years, and in some cases, mere minutes or seconds. Someone gets to lose money so that someone else gains it - that's zero sum. The stock market is, for all practical considerations of a human lifetime, a zero sum game.

That doesn't mean that game is risky though. In many cases, investing in stocks seems risky and the potential for loss is always high. Gambling professionals can make money in the same way investment brokers and day traders make money for their livings. There are some important differences here, though. Investment brokers may live off salaries or commissions, but the day trader depends directly on the market for income. The gambler may have a lot of good days, but the bad week will sap the earnings from a few good days. There is no doubt that the psychology behind gambling and active trading seems alarmingly similar, while gambling is considered illegal and illicit in many parts of the world, or at least looked down upon, day trading is mysterious and high sounding.