The Market Is Not a Casino

"Yeah, I play the market ..."
"I bet this one will go up soon ..."
"I took a flyer on that stock ..."

Phrases like that make me cringe, because they reflect the mind-set of people who see the stock market as a casino. If you have a naive and underinformed view of stock investing, you might view it as gambling.

You might be buying and selling stocks based on little things you hear or read. You might be thinking that your shares of stock are like lottery tickets -- some will be duds and a few may pay off big time. You might have seen some people build wealth in stocks and want to be "in the game" yourself. But that's not really investing. It's speculating. And speculating is dangerous.

It's real
When you buy shares of stock in a company, you're buying a real share of a real business. Coca-Cola (NYSE:KO), for example, has about 2.3 billion shares outstanding. So if you own 100 shares, you own one 23-millionth of the company. It might not seem like much, but if the company earns $2.49 per share in a year, on roughly $13.80 per share of revenue, your stake translates to $249 in earnings and $1,380 in revenue.

You won't receive those amounts in the mail -- although you will receive $1.64 per share, or $164, in dividends -- but as those sums help the company grow, the business will become worth more over time, and so will your shares.

Check out the wide range in number of shares outstanding of some well-known companies:

Source: Yahoo! Finance.

On their own, those numbers don't tell you too much. Microsoft has close to twice as many shares as ExxonMobil, but its market cap (its overall value) is close to just half of ExxonMobil's. That's because each ExxonMobil share sells for much more than each Microsoft share. The point is that each public company is made up of shares with real value.

When you invest, do so after evaluating your options. Do so knowing that you're buying a small piece of a real business, one that can grow and reward you over time. There's no need to gamble.