Table of Contents
Investing rules
Getting investment
Gambling definition
My definition of gambling :
If you know you are going to lose some part 100% with more than 50% chance, then yes. I consider that type of chances gambling.
Examples : Depreciation on prize bonds.
Investing on too risky stocks or bad companies in greed.
These types or casinos are gambling. For example if you go to a casino, you already know your chances of losing some amount are definitely more than 50%.
If there are more than 2 players in any game, you are statistically going to lose with a more than 50% chance.
Same with the slot machine or others. Chances of winning way less than 50% per play. Amount of money lost per play : 100%. So these are not investment. See the warren buffet video. Invest in what you KNOW.
Difference between speculators and investors.
Investors have knowledge about the field and sector in which they are investing into a company.
They consider at least the last 10 years of track record of the company and the type of people which are running the company. Basically if they have integrity or not. People without integrity cause problems like Enronitis.
Speculators look at the prices and have little or no idea or care for the value of the company. They think they can predict the market price based on history.
However unexpected things like price increases due to economic stimulus or quantitative easing, recessions, inflation events, news of corruption going viral, good or bad news going viral are not indicated in the previous history.
To make a profit, the speculator needs to know WHEN to buy and when to sell. For this they need to know with less than a week or maximum a month within the event, that the event shall happen.
Day traders need to reduce the timing accuracy of knowing events within 1 to max 2 hours of the event actually occurring.
The probability of knowing things and knowing of future events within these time limits is so close to zero that in all practicality you can consider it to BE ZERO.
So even if they make a little dividend payment, that shall or might not even cover the commissions related to trading. So you shall in the end see no speculator or day trader or fast trader ( trading withing weeks ) have any popularity as a profitable business.
Notice that those who are hailed as having made it via fancy methods like computing have two companies.
One company which is getting all the stellar profits and the other company which is losing money for the actual outside investors. So the money managers make stellar money while the investors lose and the brochure shall say stellar profits are being made so you should invest in the losing company you can invest in. Outside investors cannot invest in the stellar winning company.
An example of this is the best performing mutual fund.
Notice there are two companies. One funding the other. The investors lose while the employees gain.
“Lastly, you may be wondering how you can invest in the Medallion Fund. The bad news is that you can’t. The Medallion Fund has been closed to outside investors since 1993. At this point, all the fund’s profits and underlying capital are owned by Jim Simons and other Renaissance Technologies employees. Until the next Medallion Fund comes along, you and I can only dream”
Why the Medallion Fund is the Greatest Money-Making Machine of All Time
The text in case the link does not work. medallion
As in investor, you need to be able to see through the brochure and identify what is really going on.
Even if there is one company using fancy computers to make hundreds of thousands of trades to eke out some kind of profit. It ignores the fact that the commission on all of those trades might have been shoved into or denied to the money management company or trading. And the trading company supporting all those trades for “free” is actually losing value on capital by having to license and run a trading house.
When you consider the loss to another internal company or the same internal company, then you shall see that all stellar profits are made on the back of some other entity which the money managers control.