Is the stock market a casino? Yes if you don’t know what you do

Casino rouletteThe world of stock investing is full of prejudices. One of the most widespread is that the stock market is a casino, where making money is based on pure luck and in the end the vast majority end up losing their money as happens in games of chance. In this article I will analyze the causes of this general opinion and give my opinion on it.

The general idea that the stock market is a casino

I think this cartoon from "Real Life Adventures" pretty much sums up the way many people think about investing in stocks and financial markets.

Is the stock market a casino

Translation:

Daughter: Dad, how exactly does the bag work?

Father: Well, you put your money in it, and for some reason you lose money, then you panic and sell, and someone who is smarter than you makes your money.

As you can see, some believe that the stock market is a kind of rigged game in which small savers have nothing to do with large investors. Unfortunately, it is a widely held belief throughout the world.

However, I am left with the words of the legendary investor Peter Lynch:

"The stock market is not like golf, in the stock market amateur investors can beat professionals"

In fact, in this blog we have already seen the advantages that small investors have compared to professional managers. However, the general rule is that small investors lose money or, at most, make small profits.

What is this about?

Why do people think the stock market is a casino?

In my opinion, there is a fundamental cause that makes people believe that the stock market is a casino. This cause is none other than lack of training.

It is not easy to understand the operation of the stock market and financial markets without prior training. What's more, even educated people can end up thinking that the stock market is a casino, since, inexplicably, portfolio management is still taught in universities through modern portfolio theory instead of doing it starting from the allegory of Mister Market de Benjamin Graham and the postulates of value investing.

In my opinion, the only way to end the widespread belief that the stock market is a casino is through the financial formation of society. Unfortunately, while ignorance continues to reign in financial matters, we will continue to hear criticism of this type. I highly doubt that this will change in the short or medium term.

Is the stock market a casino? Yes if you don't know what you do

To finish this short article, I leave you a great phrase from Álvaro Guzmán de Lázaro in an interview on investment and value investing that we published on this blog a short time ago:

"The stock market is a casino for those who do not know what they are doing"

If you want to give your opinion on this topic or have any questions, I encourage you to share it in the comments.