Gambling Stocks

For many people, dealing in stocks is very much like gambling: They are in it more for the experience than actually making money. I realized the motivation behind holding stocks for extended periods of time: It is very much like playing a jackpot.

A jackpot machine typically has two modes: One where you constantly haemorrage cash, and another where you hit the jackpot(s). These would correspond somewhat to the bull and bear cycles within a market.

During a bear cycle, stock prices are going down. You lose 10 cents, gain 6, lose 12, gain 8, lose 4, gain 3. The overall trend is downwards. Yet it is the small upward movements that keep people in the game. It is like when the jackpot machine gives out all these little winnings to keep people playing. The small winnings never exceed what you threw in, but they are powerful motivators.

During a bull run, prices are going up. That is like when the jackpot machine gives a smallish jackpot (but not the big one). Many players are satisfied enough to cash out at this point, effectively selling their profits. Everyone else would pat themselves on the back, and then try their hand at the machine again.

The cycle repeats itself until people go bankrupt, or they hit the jackpot. It is much akin to the jackpot, considering how few people actually turn a profit at this game. Yet a game it is, with (albeit constantly changing) rules. One who masters the rules has some hope of winning the game. How many, though, are willing to learn those rules?