Why do I say this? The answer is simple.

Most forms of gambling represent a negative sums game.This means you are competing for slices of a pie that has already had a chunk bitten out of it by government, gaming institution or bookmaker.

Negative Sums Game!For example, when you play poker at a casino, you are competing for potential profits with the other players. Assuming that all players are equal and that all players get equal luck over time you will all lose, because the casino is taking a percentage of every winning pot.

It is not a complete (100%) pie that you are fighting over.

If however you were playing poker at home with your friends and the same equal skill and luck factors applied, you would all break even, as it would be a neutral sums game (unless of course your ungracious host demanded a house rake!)

What of the sharemarket? The sharemarket is a relatively good form of gambling in theory, because in theory it should actually be a positive sums game.

How can this be so?

Well in theory, more than compensating for the relatively small amounts of pie swallowed by your brokerage fees and the government (stamp duty), companies are supposed to be growing real businesses, becoming larger and more profitable over time in line with the growing economy and as a shareholder you should share in the increasing wealth being generated. In other words, the pie itself is expanding! Theoretically, if the economy kept growing, everyone investing in shares could slowly get rich.

Notice that I keep qualifying this with the words 'in theory'. This is because to talk of the sharemarket as one generic form of gambling is like talking about 'Europeans' as if they were all the same.

Introduction Continued



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