If you notice some of the terminology of investing, you’ll see a connection.
Bet. Hedge. Loss. Long-shot. Odds. Risk.
All of these terms are interchangeable with gambling parlance. There’s a connection between the two — and while most investors will tell you that they aren’t gamblers, the words they use give them away. If there is a connection between gambling and investing, it follows that investing can have some addictive features, just like gambling does. Gamblers, after all, can go to Gambler’s Anonymous. Should there be an Investor’s Anonymous?
Investors may want to look at signs of addiction in their own trading behavior. Gamblers who become addicted to game of chance rarely are in it for the money, they are in it for the emotional jolt they get from betting. The rush. If they win, that money goes into more bets and, usually, bets with much higher risks. Then, the crash.
All investors feel that same sense of exhilaration when a stock they bought starts to soar, or when a stock they shorted starts to drop. But, what do you do after the excitement. Can you take money off of the table? Can you wait until the market settles?
You may also want to look at how your emotions have fluctuated through the years. Do the “good times” of your life also correspond with bull markets — and the bad times of your life seem to be bear markets?
Asking these questions aren’t easy — and it’s hard for addicts to self-assess — but becoming more aware of whether we’re investing for fun or profit, or whether we’re just addicted to the rush of winning and losing, is important.
You may also find that you’re not addicted. But, this can still help you see how emotions can change your outlook on the market and directly influence how you invest — sometimes for good, but mostly for bad.