Singapore’s Second Casino Integrated Resort Marina Bay Sands will be opening today at 3:18 P.M. following Resort World Singapore’s opening of the first casino in Singapore.

Did you know that these two Integrated Resorts are not the first casinos in Singapore? We already have one of the biggest and the best Casinos over in Singapore and it is the Singapore Exchange (SGX).

Why Stock Trading Can Be Gambling

The thin line between investing and trading is so evident when I read the Channelnewsasia Market Talk forum. There are threads where forummers share their losses in stock market punts besides their gains. It is the stories of the losses that make you realise that the human drama unfolding.

If you lose heavily, it is a tragedy happening in real life. Savings get wiped out. Families have to tighten their belts because the breadwinner has invested in stocks that are under-water and cannot hold.

Perhaps they bought on margin using leverage. Perhaps they had some unexpected cash requirement that necessitated the sales of their shares at a loss.

Whatever is the reason, I realise that no-one can beat the market all the time and that one needs to time his entry and exit in line with his lifestyle cash needs when he is investing in equities on the Singapoore Exchange.

Investing requires patience, an ability to see the longer term but at the same time, an ability to buy when the market valuation of the share is fundamentally lesser than its “real” or “intrinsic” value. Value investing proponents believe in analysing and researching about the companies as well as the businesses they are in. But there is still an element of timing in that a fundamental investor such as Warren Buffet would buy when value is higher than the price that an asset can be bought.

The typical investor (or punter and I include myself in this category) wants to buy low and sell high. The problem is when we confuse between the time horizon (how long to hold) and the objective (i.e. long term capital appreciation versus dividends versus quick punts for returns) for buying a share that we get caught in the investor/trader/punter/gambler identity crisis.

Human beings have the ability to shift our motives to suit our actions all the time. It’s called rationalisation. I do it all the time

How to Avoid Gambling on the Stock Market

The stock market is really akin to gambling in many respects. If you strip out the superficial respectability of buying a share of the underlying business, most investors basically just want to make money from buying and selling stocks. And most of the time, we have no inkling or belief that the business is going to do better or worse down the road.

When I was catching up with my good friend CH and asked him what was his intention and motive for buying ABC stock. He told me he wanted to “make money”. But that is too vague an objective to guide his decision on how long to hold and when to exit after buying.

His answer is not uncommon. I used to be like that and at times still fall into the trap of not being clear in my mind the reasons why I am buying this share at this price and when (if ever) will I exit from the share.

To avoid gambling is to avoid the gambling mentality. Here are the warning signs of gambling versus investing behaviour:

1. Putting money you cannot afford to lose at risk in the Stock Market
2. Using margin or leverage (borrowing to invest)
3. Unclear investment horizon (when to sell)
4. Unclear investment objective (long-term or speculative punt)
5. Unclear expected returns (“make money” versus “beat fixed deposits”, “achieve 5% p.a. ROI”)
6. No interest in learning about mechanics and principles behind investing
7. Emotional roller coaster of feeling happy when stocks are in the money and sad when stocks are below water

The list is by no means exhaustive but gives some ideas on how close one is on the continuum between investor and speculator (or gambler).

If you’ve never gambled before in either Resort World Singapore (RWS) or Marina Bay Sands (MBS), perhaps you’ve done it in the Singapore Exchange and never realised it was gambling.

Share with Panzer if how close you think SGX is to MBS or RWS in the comments page

Be well and prosper.

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