Gambling, trading, speculation, and investment are perceived in very different ways but they have two core similarities. First, they all involve risking money in hopes of a positive return. Second, the results are dependent in part on luck.
A number of distinctions between the various endeavors are usually drawn. Gambling is typically viewed as a form of entertainment that carries a higher level of risk and has a less certain outcome. Speculation and investment are generally viewed as business enterprises in which risk is understood and steps are taking to mitigate and manage it.
Professional investors tend to be offended by the idea that they are gamblers. They want to believe that the research they do, the insights they develop, and their money management skills add value to the process of choosing stocks and that more than offsets the inevitable bad and good luck that will occur.
Professional gamblers can consistently make money playing poker, betting on horses, or wagering on sports because they don't depend on blind luck. They find ways to position themselves so that they can enjoy the benefits of the good luck that will occur but take steps to make sure that bad luck won't wipe him out. They may not have great odds of success but professionals find ways to shift things in their favor just like investors who do research.
To a large degree the money management that traders, speculators, and investors use is nothing more than managing the good luck and bad luck that occurs as they navigate the market. There is a tendency for market participants to believe that good results are the result of their great skill while bad results are the product of bad luck. A billion-dollar hedge fund can do all the research in the world but still be hit with bad luck when a pandemic suddenly occurs.
No matter how hard we try as traders and investors we are never going to eliminate luck from the equation and that is why it can be helpful to embrace the idea that we are professional gamblers to some extent.
Outcomes will always be uncertain and denying that fact is what causes our biggest mistakes. We like to believe that good results are due to skill while bad results are due to luck but that simply is not true. Good results are a product of luck just as much as our bad luck is.
What we must always be prepared to do as traders and investors is understand that luck is unavoidable. We can influence it to some degree with stock selection, research, diversification, and trading tactics but the gambling aspect of picking stocks will always be lurking in the background.
The best traders and investors will have very bad luck at times and they know it. They are always ready for it. They deal with it and move on. When good luck hits they don't pretend that it is due to their brilliance, They find ways to optimize gains and move on. They are constantly managing their luck.
Calling yourself a speculator, trader or investor sounds much more professional than calling yourself a gambler but gambling is what we do much of the time and we are better off when we embrace the fact that we are betting on an uncertain future.
Anyone that has gotten rich in the stock market will admit that good luck played a part in the process. The found the right stock at the right time and made the right moves to benefit.
As Thomas Jefferson once said, "I'm a great believer in luck, and I find the harder I work the more I have of it."
Work hard at trading and investing and don't forget that you are gambling and luck will always be your constant companion.