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Articles
The Myth About Stock Investing
By Pauline Yong, author of “I Love Stocks”
Many people do not have a proper understanding about the stock market. They
become discouraged when they hear people going bankrupt with money lost in
the stock markets. Actually, you won’t lose all your money if you do your own
analysis before investing.
Is Buying Stocks The Same As Gambling?
Well, in fact, there are risks involved in nearly all financial investments. Some
people buy real estate, not knowing if the value of a property will increase or
decrease over time. Others deposit their money in a bank, trusting that their
savings will be secure. Stock too, has its inherent risk. However, the stock market
is more complicated, simply put, one who invests in stocks buys the shares of a
company in the hope that the enterprise will prosper and the stocks will increase
in value.
Such an investment differs from gambling because the stockholder has purchased
part of a company. These shares may be sold to another person or held for a
longer term in hope of future growth. This is different from a person who bets
money at a casino or on a game of chance. A gambler is facing a pure risk
situation: “win” or “no win”. Against the odds, the gambler seeks to predict an
uncertain outcome and may lose all his stakes.
How much risk should an investor accept? That is up to each individual to decide.
Of course, it is not prudent to risk more money on an investment than what he is
willing to lose.
The Right Attitude Towards Stock Investing
There are many stories of investors who have become rich overnight on the stock
market; and of course there are also investors who have suffered significant
losses. The main difference between these two groups of investors is: Investors
who suffer heavy losses are generally speculators who focus only on short term
gains and they hardly know the background of the companies they are investing
in. I would urge all potential investors to consider a company’s past record and
future prospects, the demand for its products, competition from other businesses,
and several other factors before selecting a firm’s stock.
Most importantly, you must treat stock investment like any other investments
such as properties and new business ventures that require a prudent attitude
towards them.
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