Observing the investing behavior of my parents while I was growing up, I came to think that investing in anything other than a certificate of deposit (CD) was too risky. In fact, during my youthful years, I embraced the notion that people who invested in the stock market were gambling. 

Later on, it occurred to me that all publicly-traded corporations are owned my stockholders. If the corporations had no stockholders, there would be no corporations. This would mean the absence of jobs and collapse of the economy. Well, if investing in stocks is actually gambling, it would not take long before corporations would cease to exist because there would be fewer and fewer people who would be willing to gamble away their hard-earned money.

My early experience with stock investments certainly made me feel like it was gambling rather than investing. Some painful losses characterized those initial investing days. I learned some important lessons, especially about financial stewardship, from my losses. Also, I learned how to choose stock investments successfully.

Today I realize that investing in the stock market is certainly not gambling if you know how to invest. The flip side of that realization is that if you don’t know how to invest in stocks, the outcome of your investments may very well make you feel like you are gambling.

With gambling, there is a winner and a loser. Investing in a corporation’s common stock can result in a winning situation all the way around. That’s never true with gambling. Yes, if the company performs well, all participants are benefactors.

Here’s the key. You must know how to analyze a corporate balance sheet along with the company outlook in order to assess whether the company is a good company to invest in and at what price. If you don’t know how to do this, the investment indeed becomes something akin to a gamble. However, if you do know how to assign a value to the company’s stock before you buy, you have a basis for your decision, and that decision becomes an investment.