Points to note over here and Possible Scenarios:
Investment is a tricky and smart decision. It requires right knowledge and expertise to earn maximum profit from the invested money. Often investors are seen to indulge in gambling in the name of investment. It is certainly a matter of pride to manage a good portfolio. It is also good to outwit other investors or the market, but are you getting involved in gambling with the savings of your life?
Investing or Gambling?
Well, this is also like a bad habit which can become dangerous. There are some signs learning about which you will understand that you are placing your hard earn money in stake. Here are some signs that will tell you that you are not investing rather gambling.
- No strategy for exit
A trade always has two faces – buying and selling. Investors first speculate when to purchase a stock and the time to sell it. Knowing when to sell stock is more important than knowing the time for buying it. If you do not have any exit strategy, that is, plan for selling, then you are gambling and not investing.
- Approach of single investment
A proper investor will incorporate different kinds of investments to have true diversification and absolute return on his money. Focusing on only one kind of investment like stocks or mutual funds only is similar to having everything in one hand. This approach is more like gambling.
- Love affair
Gamblers usually purchase and hold stocks of the companies they love. If they are asked the reason for such an act, they cannot give a proper logical answer. On the other hand, a true investor knows the exact reason for buying and holding a stock. It has no relation with loving any product or company. Gamblers move by feelings and investors like logic.
- Addiction to the entertainment world
Another very obvious sign of gambling is when a person follows investment advice of any television personality or magazine. Here what he is receiving is not any kind of advice, it is just investment. Those who want to make their financial future secure does not follow all these.
- Constipation by deferring
Gamblers tend to drag on and move on the footsteps of their losers but investors manage their portfolio. They maintain a systematic approach in selling and buying stocks and mutual funds. They do not time the market.
So, now do you understand when investing can become gambling? These are sheer signs when they are not investing but gambling.