Gambling is defined as a few different ways. Merriam-Webster defines it as a game played for money or property, a bet on an uncertain outcome, or taking a chance. All of these definitions are probably good ones and can be applied in various fashions. Considering the state of the economy I thought it would be interesting to think about whether or not putting your money into the stock market is a gamble. The stock market is defined as a market for particular stocks. Stocks are essentially shares of a company owned by individuals. The relative value of a stock may rise and fall over time.

There are many parallels between gambling and investing in the stock market. Both require capital. It takes money to make money. There are legal restrictions on both at both the federal level and state level. Along with legal restrictions there may be licensing requirements. Casinos must meet and comply with licensing obligations and stock brokers generally must be licensed to trade on behalf of clients. In the long term, a good gambler who knows the odds and looks for an edge will come out ahead. The same can be said for the stock market. It is best to hold stocks for a period of time to get the best value. In the short term you may lose money in the stock market, but in the long run if you have a solid performing portfolio you will come out ahead. The stock market and gambling both rely on security and enforcement officials to prevent fraud or collusion. Smart investors will study the company before buying stock and smart gamblers learn the odds before playing.

Now that we have seen some of the similarities we can really ask the question, is gambling the same thing as investing in the stock market? The answer is probably both yes and no. Millions of people globally invest in the stock of companies hoping their value will go up. However there is no guarantee that it will. Referring back to the definition of gambling, investing in the stock market is akin to taking a chance. One glaring difference between gambling and the stock market however is the control large institutions have in the stock market. A large investment fund or brokerage house can buy or sell massive quantities of stock to manipulate the price, and even the viability of a company, if they choose. A large bet by any gambler will really only affect a game of poker, inducing a player to call or fold based on the relative strength of their hand. In game like craps or roulette, an abnormally large wager will not change the outcome. Even though there are similarities between the stock market and gambling, a game of poker more closely resembles the stock market.