Forum Archive Index - July 2001

["Ben Dutton" <bendutton@sharechat.co.nz>]

Great post Phil, thanks for taking the time to give your opinion - food for
thought indeed.

Best Regards

Ben Dutton


----- Original Message -----
From: "Phil Eriksen" <phil@acepay.co.nz>
To: <sharechat@sharechat.co.nz>
Sent: Friday, July 27, 2001 4:06 PM
Subject: Re: Re: [sharechat] Ebet: Time for a punt? / Ethical Investing


> Hi Ben & Others,
>
> I'm not all that interested in a discussion of morality either.  You do
> raise an interesting question however about whether investing in the
> sharemarket is gambling.
>
> Investment in the sharemarket is not gambling.  Over the long term, an
> "average" return in the sharemarket WILL increase your wealth.  While the
> returns in individual companies are wildly different, while the margins on
> the products those businesses produce will be wildly different, overall,
> investment in assets that produce something above the "risk free" return
> available will increase the wealth of those who provide the investment.
> Overall.  Some people will lose a lot of money on the sharemarket ;
overall,
> however, sharemarkets go up, investing in something that produces an
income,
> then reinvesting that income, will increase your wealth.  Same applies to
a
> private business.  Starting or buying into an existing business is always
"a
> punt", but it is not gambling ; capitalism would not exist as we know it
if
> it was.
>
> Gambling is different.  In all forms of gambling, the house sets the odds.
> History has shown that the average return through sharemarket investment
is
> a profit.  It has also shown that the average return through gambling is a
> loss.  If you enter into a transaction (ie go to a casino, pick a horse)
> where the average return is a loss *you are trying to beat the odds*.
When
> an investor aims to beat the long term returns that one could expect from
> sharemarket investment, that is where an element of "gambling" begins to
> show itself.  Just like gambling, they are trying to beat the odds ;
> sometimes they win, sometimes they lose, but the odds do not change.
>
> The bottom line is that if you gamble, you should do so with an
expectation
> of loss.  If you invest, in an "average" way (ie you are not especially
bad
> or especially good) then you should do so with an expectation of profit.
> This is what seperates the two.
>
> Definition Of Gambling : The odds are against you, but you participate
> anyway and try to beat them.
> Definition Of Investing : The odds are with you, so you participate
because
> it is rational to do so.
> Where it gets fuzzy : You know the odds, but aim for far more that they
say
> you are due.
>
> Cheers,
> Phil
>
> "Moral indignation is jealousy with a halo" - H.G Wells
>
>
>
> >If investing in the sharemarket = gambling, and gambling = immorality,
then
> >investing in the sharemarket = immorality.
> >
> >Of course, if you do not believe gambling is immoral then this whole
> >conversation will be irrelevant to you.
> >
> >So lets not focus on whether gambling *is* immoral or not, lets instead
> >focus on the question: is investing in the sharemarket gambling?
> >
> >Throwing the cat amongst the pigeons?  Maybe we should call in a
> >philosopher...;-)
> >
> >Best Regards
> >
> >Ben Dutton
>
>
>
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