With this year’s Melbourne Cup just kicking off, the race that stops the nation will no doubt have all eyes on the track. Not only is the Cup a great chance for Australians to come together (either on the racetrack or the barbeque), it also happens to be the largest betting day of the year.
Not much of a gambler myself, I still understand the simple joy of placing a bet on a horse you’ve never met – knowing you might lose, but hoping you win regardless.
But today is also a good time to remind ourselves that gambling belongs on the racetrack or at the casino, not on the share market.
Many people who don’t follow investing or see no interest in stocks might tell you that shares in general are just another form of gambling – but this could not be further from the truth.
Most things in life and finance come with risk, and this is no different with shares.
Shares at a basic level represent individual parts of a business – a ‘share’ of the company’s profits (or losses).
You are risking your money on a short-term basis for sure – no one knows what the share market will do tomorrow or the next day, and you might be confronted with a loss on paper the morning after you make your first investment.
But if you adopt a long-term mindset, the idea of gambling with shares goes out the window. Does anyone seriously think Apple, Microsoft or Commonwealth Bank of Australia (ASX: CBA) won’t be around in 10 years’ time? There’s a small chance they might be worth less, but I would wager there’s almost a zero chance you will lose all of your money on these companies – that’s pretty good odds.
If you want to trade penny stocks, back exploratory miners or buy into upstart biotech or pharmaceutical companies, by all means, go for it.
Just know that you’re really gambling with these kinds of stocks. Make sure you tell your friends and family what you’re doing as well as well, it’s best not to put the wrong ideas about shares out there.
Long-term investors like us Fools – we like to buy businesses, not race tickets (most of the year).
The post Gamble on the Melbourne Cup, not the stock market appeared first on Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019