If Stock Investing Is Gambling, You Are Doing It Wrong

By | October 26, 2020

140%. That is what my individual stock picks did in the last year (past 12 months). Yes, I am petrified that it won’t last and that I will lose money. But each month I check the financials of each company, and each month I am happy with the way the numbers look. So I stick with what I’ve picked. I have held the same companies for months.

Boring, right? Well, if I can make more than my initial investment over the next 12 months… I think that’s pretty good. But I also know that they may stagnate or lose money over some amount of time. I am ready for it. But I swear I will not sell if the financials look good.

This is not gambling. Investing is putting your money to work in a company where the financials tell you that the company will likely make money both in the short term and long term. You are also investing in 10 different companies, so if you made a mistake picking one of them, you will not lose all of your money. The odds are actually well in your favor.

In gambling at the casino, with certain exceptions, the odds are stacked in the house’s favor. While you may win on any given night, most of the time you are going to go home with less money than you took. You can gamble in the stock market by picking companies you know little about, or basing your decisions on data that means very little. Financials almost always give you a clear picture of a company’s health. Anything else is generally speculating.

So are you a gambler or are you an investor?

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