It’s Chinese New Year, which not only means lots of food and plenty of socialising but probably a game or two of cards, too.
Playing games of chance amongst friends and family over the festive holiday can be a great opportunity to forge closer bonds. Nobody really minds too much whether they win or lose. It’s all in the name of a bit of fun.
But gambling in professional establishments, such as casinos or at the racetrack, is a totally different matter….
…. I have had many people tell me that buying shares is no different to playing blackjack or roulette in a casino. How wrong can they be?
When we gamble, there are by necessity, winners and losers, where money is transferred from losers to winners. That’s because gambling is a zero-sum game. Someone must win. Somebody has to lose.
But investing is totally different kettle of fish.
When shares change hands on an exchange, both buyers and sellers are winners. Yes, they are.
Buyers gets something they want, namely, shares, in exchange for cash. At the same time, sellers get what they want, too. They get cash in exchange for the shares they own. They both walk away from the deal satisfied.
But to make the right decisions when we invest, it is vital to know what we are buying. Peter Lynch said: “Investing without research is like playing stud poker and never looking at the cards”.
Lynch was probably a little guilty of mixing his metaphors. But we know what he means. Investing should never be like playing stud poker, period.
Perhaps a better analogy might be: “Investing without research is like trampling into the stock market BirdBox fashion”.
That is never a good idea. Go in with your eyes wide open. Know what you are buying. And why you are buying it.
A version of this article first appeared in Stock Advisor.
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