Stock market gambler

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Savings rates are at their lowest since records began, the Bank of England announced this week — and increasingly, savers are turning to the stock market in an attempt to get a decent return on their money.

But hold on — isn't buying shares akin to a day at the races? Would you be no worse off reading the Racing Post every week rather than Your Money? Or can those interested in trying the stock market for the first time be reassured that it's a better way to build wealth than investing in miserly savings accounts? Exactly where share ownership stops being gambling and starts being sensible investing is a question that has exercised generations.

He oversees billions of pounds of private investors' money in the portfolios he manages at Jupiter, the asset manager.

From the point of view of the economy as a whole, this is very important. The basic function of the market — where investors provide money, for a return, to businesses needing capital — is easily forgotten, he says. Four ideas for investing in the ageing population. Good companies make good returns. That is the nature of capitalism. This whole process — using people's spare savings to help businesses grow — is socially useful. It is not the same as gambling.

Is the stock market such a gamble? - Telegraph

But the vast capital markets, where billions of shares change hands and are often owned for periods measured in minutes or less, do allow for "gambling". This is where speculators, who are not interested in the nature of a business or its prospects, try to capture profits from the short-term movement of a share price.

Gervais Williams, another professional investor with a long track record of successful portfolio management, admits: If you are buying shares expecting immediate returns you might as well visit the bookmakers. But such wipeouts are uncommon, Chatfeild — Roberts says. Investors often have a chance to sell their shares if they suspect the company might fold — although inevitably for a fraction of the price they paid.

But it is quite rare for big companies to go bust. Their share prices may fall for a bit, but generally they will rise again over a longer period of time.

Gervais Williams points out that smaller firms, while riskier, often produce bigger returns. And buying shares in several companies reduces the risk of loss if any one performs poorly: Another source of comfort is the income that shares produce in the form of dividends.

These payments, normally made twice a year, represent investors' share of the company's profits.

So, even if you buy shares in a company that goes bust years later, you will have had some return on your money. Keeping your sights firmly on a long-term horizon — such as five years away — will also help you resist the panic-stricken impulse to sell shares if they suddenly fall. He points out that stockmarket investing drifts in and out of fashion with different generations, and that the public's appetite for shares investing is often influenced by huge losses or gains.

But decades of stockmarket analysis demonstrates that "if you own shares in well-managed, profitable businesses, over time both the share price and dividends will rise".

Owning shares involves an "element of chance", admits private investor Philip Witriol, who manages his own portfolio of 41 shares, mostly built up in the past five years. But — for him at least — it is "far from gambling". Mr Witriol first became interested in the stock market when he received windfall shares from former building societies such as Halifax. These distributed shares free to customers when converting into banks. Many — such as Northern Rock — have proved disastrous investments.

But Mr Witriol, who works for the NHS, is counting on his portfolio to supplement his pension when he retires. So he is careful to pick a range of companies, including those paying dividends. Successful share purchases include Diageo, the drinks company, whose share price has almost doubled in the past three years.

I have bought shares in a start-up company — Promethean World, the hi-tech education company — and I lost 95pc of my money. He examines a range of information about companies, including their historic share prices. Other factors he considers include where their markets are based, and how these nations' economies are faring. Now it's down by 7pc," he said.

I keep hold of all my shares, and in the future that share is likely to increase in value again. Reading company accounts can help, too. Alternatively, put money into an investment fund where a portfolio manager does this for you. The dividend is a return of your capital and a sign of the management's commitment to shareholders.

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Once paid, that money cannot be lost or squandered by the company. New investors are inclined to buy and sell more than experienced investors, which triggers costs and crystallises losses. Find out how to invest in recovery with this free guide.

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Accessibility links Skip to article Skip to navigation. Monday 19 June Andrew Oxlade Time to panic? No, follow the investment rulebook. Kyle Caldwell My five investment resolutions for Richard Evans Bank security: James Anderson This is why I'm worried for investors in the FTSE Is the stock market such a gamble? As savings rates slump further, can cautious savers be persuaded that the stock market is a better way to build wealth? Can those interested in trying the stock market be reassured that it's a better way to build wealth than investing in miserly savings accounts?

Case study Owning shares involves an "element of chance", admits private investor Philip Witriol, who manages his own portfolio of 41 shares, mostly built up in the past five years.

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When investing becomes gambling - May 8,

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Investing Vs. Gambling: Where Is Your Money Safer?

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