Why invest? How about what is investing?!
Like most downtown Torontonians I’ve been spending the past year working from home and recently I discovered something. I discovered that I’m not ‘working from home’ as much as I’m ‘sleeping at the office’. It’s a subtle distinction and even sounds mildly amusing phrasing it that way. My point is that working from home (pre-pandemic) was an enjoyable experience. I got to avoid onerous daily commutes, attend meetings at clients’ offices, meet colleagues for coffee and regularly pop downstairs to the local deli patio for lunch in-between conference calls.
Since the pandemic lockdowns I still have no commute, still get to attend regular conference calls with clients, can have as much coffee as I wish from my own kitchen, and maybe even have lunch delivered to my front door and yet, much of the enjoyment is missing. The idea of my home has been reclassified into my office, and candidly, it feels like I never get to leave my office. The monotony and boredom that has ensued robs me of my enjoyment. Even though the activities are largely similar, ‘working from home’ has turned into ‘working from a confined space’.
This brings me to a (financial) realization that also occurred to me during this time - so many people I know now sit and trade stocks on a second laptop while they’re doing work Zoom calls. Since March 2020 the number of non-professional traders on the markets has risen ten-fold. In the last year literally millions of people have opened new self-directed trading accounts. From Robinhood to TD to QuestTrade to Wealth Simple to WeBull accounts everybody and their dog has now started trading stocks, and even more concerningly, trading on margin and with risky and speculative options contracts. So what, you might ask…
Most of my friends and colleagues call what they’re doing ‘investing on the stock market’. In reality what I think they’re doing is at best short-term arbitrage (buying low and selling high) in a highly manipulated market, and at worst, nothing more than gambling. Much like my shifting ‘working from home’/’sleeping at the office’ narrative, the actions taken in investing (buying and selling stocks, ETFs, mutual funds etc.) and gambling on the stock market are largely the same; but the context is vastly different.
To be clear, there’s nothing wrong with gambling per se, so long as you know that’s what you’re doing and you are aware of and accept the risks involved. Investing, on the other hand, is expending money with the expectation of achieving a profit or material result (from the investment) e.g. having a financial plan, buying a property, asset or shares that yield an on-going return, and wherever possible leveraging the power of compound interest to enhance the return from the investment.
At the end of the day, investing is a rare, worthwhile and valuable skill to hone and is reliable for building great wealth over generations. Gambling is a frivolous and addictive pastime that reliably leaves people anxious, depressed, and more often than not, broke.
