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Isn’t buying ASX shares on the stock market just gambling?

Sebastian Bowen
Gambling chips dice and cards

Many, many people… countless even, have told me they don’t like investing in shares because it’s ‘just gambling’. I’ve heard reasons for this ranging from ‘I prefer property because you can touch it’ to ‘I just stick with the pokies’.

Sadly, this mindset is all too common. And it has arisen because of disinformation and ignorance. For anyone not involved in the share market, it’s likely that the only news they hear about it is when the market plunges and headlines like ‘ASX wipes $50 billion’ are plastered all over the front page. Or else, ’26-year old now millionaire after amazing stock pick’.

These two extremes paint the share market as some kind of wild west, high-octane casino of capitalism.

Unfortunately, if you don’t understand how the market works, that’s exactly what it is. Losing money on the ASX is as easy as fishing in a barrel. Buying random stock picks from friends, throwing money at tiny miners that might hit it big or just throwing darts at an ASX board and buying the landings are all ways of gambling on the market.

But you don’t have to do that.

Take Commonwealth Bank of Australia (ASX: CBA). It’s the largest bank in the country and a central foundation of our economy. Does anyone really think buying CBA shares is gambling? Sure, CommBank might have its ups and downs, but the chances of CBA going to zero over the next decade or two are remote at best.

Or Woolworths Group Ltd (ASX: WOW). As Woolworths is the largest grocery chain in Australia, supplying food and household essentials, I’m pretty sure it’s not going anywhere anytime soon either – unless we somehow manage to evolve beyond the need to eat, shave and wash clothes.

Even if buying shares in these kinds of ‘safe’ companies doesn’t appeal to you, you can always buy into an broad market index fund like Vanguard Australian Shares Index ETF (ASX: VAS). It’s not really gambling if you bet on every horse in a race, and with an ETF like this, you are getting exposure to over 300 of the biggest companies in the country. Not much chance of all of them landing on black, in my view.

Foolish takeaway

There has (and will continue to be) crashes, crises, drops and corrections in the stock market. But these happen far, far less than steady gains (you just don’t tend to hear about it). At the end of the day, there has never (ever) been a period longer than a few years where the ASX has failed to go up. Those are odds I like betting on.

The post Isn’t buying ASX shares on the stock market just gambling? 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