Wednesday, April 07, 2010

Investing and the casino

This article is quite frank. It says that investing is like the casino. The lessons from the casino can be applied to investing. I agree.


Parka said...

And here's what's different: You don't learn anything from gambling.

Investing isn't about all about luck. Picking the right stocks isn't just about looking at numbers or historical data or statistics.

Gambling over a period of time doesn't make any person smarter simply because there's no way one can affect the outcome. It's just math.

Hiei said...

I tend to agree with the article. Investing and gambling are both similar in nature. As to what Parka commented, you did learn something from gambling. Is how you perceive learning. Investing involves a lot on luck too, and picking the right stocks is indeed how you digest the numbers and historical data. Other than that, I reckon you need some insider news to perform well in stock markets, which can be illegal.

In fact, I find casino way of doing business a much honest way than financial products. The casino did the maths, so they can make money in the long run. If you did your maths, you will probably find that is not quite possible to beat casino, which they agree. Unlike many investment products, they did much more complicated maths and tons of assumptions, which always confuse customers. Also, I notice that a lot of assumptions are not quite realistic assumptions.

A very good example of unrealistic assumptions, financial modeling always like to calculate present value and future value. These always use assume or expected future interest rates, which is never correct. So their calculated future value never tally with the real value in future.

Hank said...

Thanks for mentioning the original article. The blog post is actually part of a series of posts on what you can learn about investing from a casino. I encourage everyone to check it out.

Don't watch your bankroll or the stock market

Anonymous said...

Yes, if you buy funds from insurance agents you are actually putting bets into the funds in the hope or luck that you have punted on the right fund that will make money for you.
In 2001 churning and twisting of funds were so blatantly committed by agents. Agents made a lot money by churning especially the CPF money.
It is true that 'investing' was no different from gambling.
After 10 years CPF members have not recouped the losses. 87% of the members are still losing. CPF should stop this gambling .CPF must stop allowing insurance agents to 'invest' on behalf of members.Insurance agents have no investing skills or knowledge or expertise.They are unqualified. They have passed only the tikam tikam exams. CPF mustn't allow the insurance agents to tikam tikam the members' money which is for their retirement. If it is not stopped CPF members cannot retire and they will be a burden to the country.
Think about it. CPF should not allow CPF be a source of business to the insurance companies. Not just $60K but all the money should be barred from the hands of unscrupulous agents .Hope CPF has not forgotten what happened to members' money when it was first liberalised how insurance agents wiped out all members' money to buy endowment, punted on funds and many members ended up losing all the capital. This must not happen again. To insurance agents investing is gambling in the huge casino.

Anonymous said...

e key from e article so far is dollar cost averaging in e long run

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