Integrated Financial Training: Westchester NY

Empowering you to Manage your Money and your Happiness



Investing vs. Gambling

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Greed for that which causes happiness is good. Greed for that which causes misery is bad. May we all know the difference.

Greed for the accumulation of money to achieve happiness through sensory means (e.g. eating nothing but the finest foods) will not result in happiness at all, but only problems. When we have such greed, we tend to look only towards the result, more money, without any consideration for the methods that are likely to produce it such as patience, relaxed/continuous effort and proper investing technique. The net result is we fail in our dual quest for money and happiness. 

In martial arts training, you need two factors to be genuinely effective: technique and understanding of principle. If you have good understanding of principle, such as elimination of greed for that which causes misery, but you do not know technique, you can be defeated by a skilled opponent who knows no principles. But if you understand principle and have skill, you cannot be defeated. In investing, the same can be said of the process. You are best to avoid greed, but you also need skill in investing technique to have an effective process.

So if I buy a stock, how is that different from playing roulette? You have someone taking each side of the bet in either case. Whether buying a stock is gambling or investing is determined primarily by your intention when you make the purchase. Gambling is done simply because you want more money for reasons that do not cause long term happiness out of selfish greed. Investing is done to take proper care of your resources so you can be more effective in benefiting yourself and those around you. Secondarily, you have to ask if the reason why you are buying the stock is related to the rationale for anyone to buy a stock - to take proper care of their resources by buying companies that seem likely to produce economic benefits as a result of a calm, detached analysis. Alternatively, is the reason completely unrelated, such as an expectation that a chart of its price will follow a prescribed pattern. The first question, motivation for the purchase, primarily determines investing versus gambling. The second question, the rationale for the purchase, addresses the skill in determining the purchase. To be effective in investment processes, you need both intent and skill.

While it seems straightforward that pure investing is good and pure gambling is bad, what happens when, like most people, we cross skill in the rationale for making a purchase with some greed in our intent? The reason why principle is so important in martial arts is that a calm mind allows us to see danger coming long before it arrives. We can easily avoid it. For investing, greed clouds our judgment so we will miss obvious signs of trouble such as holding out irrational hope that our maligned investment will still pay off. Much of the discussion of gambling in the financial press directly attacks the economic reason for the purchase, or the skill aspect, and perhaps only indirectly feigns interest in the underlying intent. But here we can see the underlying intent is actually primary, although skill is certainly a secondary factor. So the take away here is that we must examine our motivation carefully before investing to be certain we are not directing our efforts to accumulating misery and possibly lack of funds for ourselves as well. As they say, you should be careful what you wish for - you may get it.

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Legal - The purpose of this site and all services offered are educational in nature and not to provide any investment advice, planning or recommendations of any securities. The purpose is to educate you to make your own financial decisions, or prepare you to evaluate your financial advisors with confidence so you can gain trust in the services they provide.




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