THE great economist and Noble prize winner in economics, Paul Samuelson once said

Investment should be more like watching paint dr or watching grass grow! I" ou want
e#citement, take $%&& and go to 'as (egas!) This statement contains the message that
investment is not like plaing gambles! *ne should invest with long term vision not with
the purpose o" gambling to be rich overnight since no market o""ers such opportunit "or
anbod in the world e#cept the house o" gamblers such as 'as (egas! +ut the stock
market, though not a place "or gambling, involves gambling! So, should we gamble, -e sa
es but a simple es is not su""icient since gambling involves the higher possibilit o"
making an outright loss! -hile making investment decision in the stock market, an investor
"aces the .uestion/ whether he is taking risk or he is gambling, *"ten the term risk is
con"used with gambling and investors "all into the pre to "oll behavior and pa the price
"or their mistake! I" he0she gambles, then how should he0she gamble,
Sometimes investors need to take pure risk and sometime the need to do pure gambling
because investment opportunities come with di""erent in"ormation which is in most o" the
cases not complete! 1or e#ample, i" an investor sees that a stock is being currentl traded
at Tk 2&& and intends to purchase that, he0she needs to "orecast the discounted "uture
value o" the share! Even then he0she calculates the Net Present (alue 3NP(4 o" the share,
he0she ma "ind it .uite hard to reach on that basis to settle into the decision whether
he0she should purchase that share at all! This is a case o" taking pure risk because his
investment decision is circumscribed b calculated uncertaint and this uncertaint
introduces the element o" risk in his investment! *n the other hand, i" he sees that the
value o" a share which is a 5unk share has increased to 26& which he0she purchased at
786, he ma con5ecture on the basis o" second hand in"ormation that the value o" the
share ma increase more than 26& in the "uture 9 a sill behavior which pauperized
thousands o" investors in stock 2&7& stock market crash 9 and opt not to sell the share
though the current market price o""ers good pro"it! This is a pure gamble! :inimizing
losses along with gambling in the stock market is the "oremost challenge "or an investor!
;ambling on share price 26& puts the investors at high stake o" making loss in "uture! So
what is the solution then,
To "ind out the solution, we can imagine a situation like this! 'et<s sa person = is a stock
>an we gamble in the stock market, http/00www!thedailstar!net0can?we?gamble?in?the?stock?ma!!!
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market investor and has invested 7&&&&&Tk! "resh capital in the stock market! To simpli"
the analsis more, we also think that he has invested the whole capital in one stock called
! His prudent investment strateg has paid o"", and he has made a gain e.ual to A&&&&Tk
in the stock! Now he0she is contemplating to build an investment port"olio investing in
di""erent kinds o" stocks! In his port"olio, there are two stocks called z and w! Investment
in z involves taking pure risk, and the investment in w stock involves gambling since he0she
has no clue about the NP( o" the stock and he 5ust invests in this stock with a 6&?6&
chance! Cs he0she has in total 7A&&&&Tk to invest in the total port"olio including in the z
and w stocks, he0she must "irst determine how much to invest in w stock and how much in
z stock! Then, the ver crucial one, he needs to speci" which mone he should invest in
which stock! Though total capital is now 7A&&&&Tk, A&&&& is the pro"it earned "rom selling
stock! Since, the investor will gamble on the market price o" w stock, he should gamble in
such wa that his loss is minimized and gains are still ma#imized even i" he0she makes an
outright loss! How is this possible, This is possible i" he0she invests out o" A&&&& pro"its in
w stock! Now even i" he0she makes loss, he0she will lose the pro"it not his original capital!
Similarl, he should invest out o" 7&&&&& in the z stock! The strateg is that one should
gamble in the stock market using mone collected "rom immediate gains or the ver recent
gains "rom the stock market! This will help him0her to minimize loss and ma#imize gains in
the stock market!
-hat is the 5usti"ication "or this strateg, The 5usti"ication is that toda<s gain is tomorrow<s
capital and esterda<s gain is capital not onl "or toda but also "or tomorrow! In this
sense, loss on immediate gains is alwas less than the loss on distant gains! I" we simpl
state the investment strateg, we sa that don<t destro our capital but destro our gains!
I" investors had gambled using gains "rom share market, our pro5ection is that crash
which has alread occurred would never have happened, irrespective o" the "act whether
somebod is manipulating the market price or not! Now even i" all investors gamble, which
is not true, gambling will not cause a big crash as the scale will still be too small to cause a
big crash! -hile Samuelson has advised us to go to 'as (egas to seek e#citement in the
investment, as long as the stock market o""ers the chance "or gambling, gambling in the
stock market is more economic than gambling going to 'as (egas! There"ore, "or a stock
market investor knowing how to gamble is more important than learning how to resist the
temptation o" gambling which is in most o" the cases not realistic keeping the nature o"
stock market in consideration!
The writer is with the Dniversit o" Eenver, DSC The writer is with the Dniversit o" Eenver, DSC The writer is with the Dniversit o" Eenver, DSC The writer is with the Dniversit o" Eenver, DSC
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