Stock Market Investing Odds

The greatest stock market myth is the idea that investing in stocks is a form of gambling!

The financial markets are often compared to a casino. Put some money on X stock and you might as well be playing craps!

If that's your impression, and it's keeping you out of the markets, consider this: If investing is organized gambling, it's one of the rare kinds where the odds are stacked in your favor!

Why is that?

Corporate profits are the key to understanding the investor's edge. By buying a share of stock gives its holder an ownership claim on that company's earnings. If those earnings go up, then the stock price will usually rise as well. Makes sense, doesn't it? Ownership of a company that has higher earnings should be worth more than ownership of a company that earns less.

An investment in the stock market comes down to this: It's a "bet" that corporate profits will rise! Based on the historical evidence, it's a pretty good wager! Not a guarantee by any means, but one where you hold house odds.

Still not convinced?

Maybe you're saying to yourself that just because corporate earnings rise in most years doesn't mean there aren't years in which they fall. True enough. But over the last 200 years, business profits have increased in far more years than they have decreased. And that's because the economies in the developed countries have expanded at a fairly steady pace with only several occasional setbacks from recessions.

And that means stockholders with a good mix of companies are more likely than not to make money!

Gambling just transfers money from a loser to a winner because it produces nothing ... excluding the severe doses of adrenaline!

On the other hand, investing increases overall wealth because the capital invested in stocks provides the initial funding for firms, which exist for the purpose to producing goods and services.

Copyright © 2005 I.E.C. Haramis

haramis@greekshares.com

http://www.greekshares.com

Ioannis - Evangelos C. Haramis was born in Greece and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank.

---

Stock Market Volatility

In my opinion, due to the volatility of stock market... Read More

Investment Capital Gains

Have you bought any mutual funds this year or late... Read More

KISS Formula

There are formulas for just about everything, but it has... Read More

Why Investors Use Financial Planners

Do you have a financial planner? Does one of your... Read More

A Common Misconception about Stock Prices

I cringe every time I hear a novice investor tell... Read More

The Information Age

It is wonderful to be alive in the information age.... Read More

Picking Mutual Funds to Outperform the Market

With over 6,000 mutual funds available, it may be tempting... Read More

Parachute Investing

Ever jumped out of an airplane? It's OK if you... Read More

Series 7 Exam

What is the Series 7 Exam? If you... Read More

Bollinger Bands Strategies

The Bollinger Band theory is designed to depict the volatility... Read More

Forecasting the Stock Market

Every day I see in the financial section of newspapers... Read More

Selling

The stock market has been going up for more than... Read More

Price to Earnings Ratio - P/E

After finding the price of a particular stock, usually the... Read More

No Load Mutual Funds: Boost Your Portfolios Returns

Investors who exclusively use broadly diversified, no load mutual funds... Read More

Stock Market Investments

If there is one term over-used when talking about making... Read More

Getting Even

I know there are a lot of you out there... Read More

Fake Money

Reach in your pocket and take out that big roll... Read More

Your Trading Objective: Why is that so Important?

You've decided to try your luck at trading stocks or... Read More

Stealth Bull

If you have been watching the stock market at all... Read More

Dont Buy Worldcom! A Guide to Wise Bottom Fishing

Over the past few months, several investment professionals have brought... Read More

Stock Options Trading Strategies - Lean

Professional stock options traders use the term lean to refer... Read More

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

Where Is The Rabbit?

We need a rabbit!This was a pretty horrible week for... Read More

Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others

When it comes to stock market trading it PAYS to... Read More

More Window Dressing

Two weeks ago I wrote about what the Securities and... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend... Read More

Analyst Reports

When you become interested in a stock or mutual fund... Read More

The POWER of a Proven Stock Investment Plan

When you invest in the stock market for ever-increasing cash... Read More

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

Robert Rodriguez Weathers the Stock Market

Robert Rodriguez likes to buy stocks at their lows. When... Read More

Invest In The Stock Market For The RIGHT Reason, Using The RIGHT Choices

Invest in the stock market for the RIGHT reason, using... Read More

Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips

Day trading is all about making buy and sell decisions.... Read More

Gurgle Gurgle

Caught in a whirlpool and being sucked under. No life... Read More