Posted on September 11, 2009 - by Eng Tiang Chuan

Investing With A Gambler’s Mentality

Photo by waffler

“Do you play the stock market?” “Which stock are you playing now?” Do these sentences sound familiar to you? Many ‘investors’ invest (speculate is a better word..) with a gambler’s mentality, attempting to ‘play’ the market through series of buy and sell. By associating investing with the word ‘play’, investment becomes a game, just like gambling. In any game or sport, different players come with different level of skills and thus, they can be ranked accordingly. Unlike a sports player whose level skills can be evidently displayed in a couple of hours, it could take years to tell apart an investor with ’skill’ and an investor with luck.

A colleague shared with me during a discussion that her client was looking for an IPO fund, ie a soon-to-be-launched fund that is still collecting money. A private banker has recommended such an IPO fund before to the client and he has made money buying into such an IPO fund and selling after a few months. Many stock punters like to bid for IPO stocks and sell them to earn a quick buck. especially during a bull market. No though is given to the fundamentals or asset allocation considerations. This particular banker has successfully sold the idea of a new fund having similar features to an IPO stock. And why sell such an IPO fund=IPO stock idea? The fund can be sold after a few months. And the reason for this type of frequent buying and selling should be very clear. Read more…

Related posts:

1. Is Investing Gambling?
2. Dividend Investing:It matters when you buy the stock
3. 3 questions to ask yourself before investing in stocks