Betting and Equity Market

2 min read

Betting and Equity Market- Similar principles yet so different

Most people tell me that betting is a form of investment. In principle betting is not an investment, however i think it shares some fundamental similarities with investing in shares. I am in no way encouraging or otherwise of people betting.

Here’s to a controversial situation:

Now, the equity market is characterized by volatility, that is the prices of shares could go up and down on a regular- Same for Betting, you can either lose or win big. The difference in here is that for equities, you don’t lose your total investment unless the company winds up- even so there’s a last resort where company assets may be sold and after everyone else has been settled, shareholders would be paid. Unfortunately for betting, when you lose, there’s no remedy.

Both are “long term” in nature. Equity investors would normally have a long term perspective. Same as betting, from most experiences shared, you lose over a period and hit once in a while. So you have to be patient yet consistent over a period; ride the downsides until your big break happens. Thus, the “long term” here is the patience you need to have.

Caution- you should know when to stop and don’t be greedy.

For equities too, there is a stop loss order where you can tell your broker to sell your shares when the prices falls to a particular level. Do not go borrowing to bet. That’s a big NO! But in some equity markets you can borrow through short selling.

Both are information sensitive- betting odds are shaped by history and information about who and who are going against each other. What is the likelihood of A winning against B, what is the current form and who’s playing home or away and the likes. Equity prices are also hugely influenced by information available on the market. Is there a good corporate governance structure, is there an upcoming merger or acquisition, is there a potential dividend declaration etc.

Experts?

Betting experts- Come on! Nothing like that, just predictions based on instincts and a few historic happenings - Equity analysts? Fundamental or technical analysis! ? Paying attention to quantitative data to price a security when the qualitative evidence is also very important . Reason every analyst has a different valuation and expectation of the same stock! One says sell, another says hold, yet another says buy more. Same for bet- one says Team A is going to Win, another says B, the match actually ends in a draw.

As seen they have some similarities and differences but what i would recommend is investing in shares rather than betting.

Do you agree with me? Share your thoughts and reach out to me on my social media platforms. Twitter

Tags: investment | betting | equity |