The Stock Market, a glorified casino?
- ejorigin
- Mar 13, 2025
- 5 min read
Updated: Jul 27, 2025
Written and designed by: Tan Kai Rui (24-I1)
We have all heard stories of thousands of individuals who got rich overnight in the stock market. Ariel Rodriguez, an amateur trader, turned his 28 thousand dollars to 3.8 million — more than a 1000% of returns on a single trade. On average, seasoned investors are able to get returns of around 10% every year. On the other hand, there are also countless frightening stories on how millions of people had their life savings wiped out in the stock market. During the 2008 global financial crisis, American households lost an estimated $16 trillion in their net worth. Such a large sum of money, gone in just a matter of moments.
The chance to win big as well as losing it all is strikingly similar to that of a casino. So why is one considered a good investment by many while the other tends to be considered gambling? To answer that question, we must first understand the stock market in greater detail.
What Is a Stock?
To put it simply, a stock is a share in the ownership of a company. Hence, when one buys a stock, it is equivalent to buying a small piece of that company. The extent you own the company is entirely dependent on the number of shares one owns in proportion to the number of shares issued by the company.
Why Do Stocks Exist?
In theory, allowing investors to own part of one’s own company seems like a sure way for CEOs to lose millions of dollars in potential profits. Additionally, there are steep costs and laws and regulations that must be followed in the process of allowing a company to be publicly traded, which raises the barriers to entry. However, the benefits of generating more capital to grow more aggressively in the future is incentive enough for business owners to decide to go public. As a side effect, being publicly traded also provides the benefit of free publicity for the company. In 2021, Gamestop was put into the spotlight by the mainstream media due to a dramatic rise in stock prices which earned investors millions of dollars despite nothing about the company changing.
Are We Able To Predict Which Companies Are To Grow?
As individuals, we are unable to predict how the market will evolve in the coming years. In fact, we don’t even know which companies will still exist in the future. General Electric, the second biggest company back in 2000, is not only no longer one of the biggest companies but has also fallen in market cap by around 75%. Of the twenty five biggest companies back in 2005, only seven of them still remain in the S&P 500 today. It is clear that the companies that define our lives today, may very well not be here tomorrow.
Why Do People Buy Shares?
Ultimately, investors buy stocks in the hopes of earning money. Investing in the stock market is not about predicting which companies will be at the top of the charts in 20 years. Instead, it is about having the belief that the particular stock will grow over time, accumulating in value.
Having a good sense of what is considered to be a profit-making company seems like a sure way to earn money 20 years down the road, however the stock market is a volatile place.
Despite all the instability and uncertainty when investing in the stock market, there are still some ways to make a more stable profit, such as investing in Exchange Traded Funds (ETFs). ETFs are an index that have a bundle of assets. This creates diversity within the stocks one buys, which makes it more stable. One of the most popular ETFs is the Standard & Poor 500 (S&P 500) which tracks the 500 leading publicly traded companies in the United States of America.
While ETFs provide lower returns in the long run, they are less volatile due to their diversity. This is because even if one of the assets within the ETF were to do badly, there are other assets that can help cushion the impact. For example, the S&P 500 has had an average annualised return of about 12.9% over a 10 year period. While this is a far cry from the 26.41% return one would have gotten if one had invested in a company like Apple, for every company like Apple, there are hundreds of other companies that go bankrupt.
Is the Stock Market like Gambling?
While some do try to take the safer route to earn money in the stock market, there are communities of people online such as “r/wallstreetbets” on Reddit that try to game the market, hoping to be one of the few successful ones who can get unbelievable returns. They put large amounts of money into high-risk volatile stocks, which creates the thrill one might receive in a casino. Investing in the stock market becomes gambling when one buys shares of a company based on news or luck rather than on the hard facts presented by the company. For example buying shares of Trump Media Technology Group Corp upon hearing of the attempted assassination of the former U.S. President Donal Trump would be seen as gambling. The fundamental business model of the company did not change upon the news of the attempted assassination to warrant the 30% jump in share price.
How is this Different from a Casino?
Despite both a casino and the stock market providing people the same dream of becoming rich with just a stroke of luck, the difference in objective is what sets the two of them apart. A casino aims to maximise its profits from its customers. Macau, home to some of the world’s largest casinos in the world, receives more than 29 billion U.S. dollars in revenue yearly. This is 29 billions dollars of hard earned money thrown away. In most casinos, the return to player percentage of a casino is between 90% to 98%. For every one hundred dollars that enter the casino, the player is expected to walk out with 9 to 98 dollars. Therefore, to see a casino as anything other than a method of entertainment would be foolish. On the other hand, the stock market instead uses the individual's money as capital to help a company grow at a faster rate. Therefore, on the condition that the world's economy continues to grow, the overall stock market will continue to grow with it.
The difference between investing and gambling is simple. While gambling revolves around luck, investment instead is based on the genuine belief that a company will provide a necessary service for society, thus continuing to make money.Overall, the answer to the question if the stock market is a casino depends on the individual's mindset. Money is not something that multiplies twofold overnight. Every dollar comes from the blood, sweat and tears of our society. There is no such thing as a free lunch, and thus we must not give into the allure of exponential financial growth. Instead, we should remain responsible in how we spend our money and plan out our lives.
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