Learn the stock market in 7 easy steps. Get spreadsheets & eBook with your free subscription!

Stock Market Gambling: Not a Casino

One of my email subscribers had a view about the stock market that is widely accepted across the world. Their response implied the system was rigged like a casino, a sort of stock market gambling instead of investing. They said:

“I am stuck, thinking that the share market is a giant casino. I am caught up thinking that the 95% of the money invested in the markets is only helping the 5% due to their large influence. I have say one dollar. They have a million in comparison, they can change the outcome of performance, I can’t. The house always wins. The little guy goes home losing their investment.”

I want to preface my thoughts by first acknowledging that your viewpoint on the market is very common. This idea that the little guy can’t win is profusely reinforced in the media constantly. With each new crisis (think back to the housing debacle of ‘08), there are countless new stories of average people getting screwed.

So-called experts and respected authors only perpetrate this myth, and it becomes a handy narrative to help victims with their loss. After all, what is pop culture good for but to absolve individuals of their personal responsibilities and blame it on a broken system.

stock market gambling

It’s true that you might only have 1 dollar, and the “big guys” have millions. But you have to understand that the whole of the stock market deals with trillions of dollars. The difference between $1 and $1 million is the SAME as the difference between $1 million and $1 trillion.

Even the most wealthy individuals are barely cracking the surface at being able to control the stock market, much less at a global scale.

Consider that the biggest stocks right now are in the $500 billion range (Apple, Exxon Mobil, etc). The most wealthy man is in the $10 billion range. Now the S&P 500, which is what people commonly refer to when they are talking about “the market”, crossed the $15 TRILLION mark last year.

So even the biggest company only controls around 3% of the market. Take the power of the most wealthiest man and it only adds up to 0.06%. Keep in mind that this only accounts for the U.S. market, imagine how much less power the “big guy” has when you consider the whole world.

Simple arithmetic shows us that even the top 1%’ers and so-called big fish are actually just little fish in this giant world we live in. The idea that big, powerful men can manipulate the market like pawns… while it makes a good story, it doesn’t represent reality.

Stock Market Gambling: How Not to

Look, I don’t want to lecture to you or debate about the validity of this stock market gambling opinion. There are people whose actions resemble gambling, and people who invest wisely.

Give me this time to do something useful for you. Instead of debate, let’s find the solution. I’ll try to briefly show you how NOT to invest, and so you won’t be set up to a failing system.

The two most basic and important foundations for your investing strategy need to be:
1. Dollar cost averaging
2. Diversification

Just by implementing these 2 concepts, you’ve already moved out of the gambling camp and into the intelligent investing camp. Of course, I go into more detail about finding value and optimizing returns with other advanced strategies throughout my site, but this right here is most important.

Dollar cost averaging: This is a fancy way of just automating your investing. All you have to do is commit to a dollar amount every month, and you are dollar cost averaging.

This prevents all of the stock market gambling and second guessing that can be problematic for the uninformed. A plan that invests the same amount every month, say $150 a month or so, forces you to buy more of an investment when it is low and buy less when it is up. The beauty of this is that it’s an automatic buy low, sell high. Click here if you need more explanation.

Diversification: This is also a very basic investing concept, but it’s so crucial. Even the most skilled investors in the world make mistakes at times. Even the best run companies run into unfortunate situations or changing market conditions.

The only way to really protect yourself is with diversification. What it means is that you spread out your risk by having multiple investments. It’s risky and stupid to put all your eggs in one basket. Instead, try to achieve a portfolio of around 20 – 25 stocks. Click here for more about this.

Find Your Power

Get your head out of thinking that you are powerless to change the outcome of performance. The truth is nobody has the power to change performance. The only thing you can control is how you take action. If you have a good system, you won’t win every time, but you’ll win over the years and across multiple investments.

Think of it like this. If you are trying to win the Super Bowl, can you do it all in one play? Or do you need to excel over the course of a long, grueling season?

Even if you have assembled the best team on the planet, it will take countless hours of practice and execution to make it to your goal. Even then, you’re not guaranteed to win. You have to have the right strategy and execution.

Luckily for us, the stock market isn’t like football, which only has 1 champion. Millions of people can win in the stock market together, and I’ve been able to experience this winning myself. I really encourage you to break some old habits and explore the possibilities with the market.

I can only offer the information I have, but it’s up to you to take it. Subscribe to my email newsletter, which is where my best stuff can be found. In the end, you can’t blame anyone but yourself if you didn’t seek out information that might have helped you get rich.

**Stock Market Gambling: Not a Casino**
**All Rights Reserved. Investing for Beginners 2014**

  • Eric

    Hi, I am interested in dollar cost averaging to build my portfolio. Is there a way to avoid the transaction fees from the brokerage sites which would accumulate if using this strategy?

    • There’s no way to completely avoid fees. You can consolidate your purchases to once a month to reduce fees.

      For example, instead of buying 3 shares of company A, 2 shares of company B and 5 shares of company C every month– for 3 transaction fees…

      Buy 9 shares of company A in the first month, 6 shares of company B in the second, and 15 shares of company C in the third.