Are You An Investor or a Gambler?
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There was a really interesting article in this months issue of Moneysense about deciding if you are a gambler or an investor. I have never seen clear cut criteria on this so it was very interesting to see. The author, Duncan Hood, provided a list of 11 traits that a clinical psychologist in San Francisco deemed as indicators to being a gambler. If you exhibit five or more of these traits, you may have a gambling problem, according to his research:
1. You engage in high volume trading,where the “action” is more compelling than the objective of your trade.
2. You are constantly preoccupied with your investments.
3. You need to invest more and more money or increase your leverage to feel excited.
4. You have repeatedly tried to stop or control your market activity and failed.
5. You become restless and irritable when you try to cut down or stop investing.
6. You invest to escape problems, relieve depression, or distract yourself from painful emotions.
7. You sometimes increase your position in an investment after a loss — that is, you chase your losses.
8. You have lied to conceal the extent of your involvement in the market.
9. You have committed illegal acts, such as forgery or fraud, to finance your market activity.
10. You are jeopardizing significant relationships or your job because of excessive involvement in the market.
11. You have relied on others to bail you out when you got into desperate financial situations.
Some of these are pretty blunt – i.e. illegal acts, forgery – I would say if you do that you have more than gambling as a problem! I am also going to bet that these types of investors don’t do their research when buying their shares.
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Growth in Value said:
I saw that article, too, and it struck me as a tad misleading.
I’m by no means a gambler, but it strikes me that anyone who, say, reads your site (or any other pfblog, for that matter) is probably automatically guilty of #2 and #7.
I think having a pfblog and reading about investing on the internet would probably qualify as a preoccupation under most people’s definition.
And as for chasing your losses, I’ve done that myself occasionally and it’s paid off handsomely. it all depends on which losses you chase. I’ve cut my losses and ran on occasion, because i thought it was the wisest course — but not always.
If I thought a stock was a bargain at 10, isn’t it even more of a bargain at 8, providing I’ve done my research on it?
October 17th, 2006 at 8:52 am
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