What is the boundary between investment and gambling? Part ④ Stocks and FX Edition — Tokyo Research Institute —

Hello everyone!

We are the Tokyo General Research Institute staff team!

So far, in the series “Where is the line between investment and gambling?”

• Publicly run horse racing
• Casinos
• Lotteries

we have looked at these topics.

This time, we would like to think about stocks and FX!

Publicly run horse racing, casinos, and lotteries are operated by the bookmaker, and the bookmaker earns a substantial profit.

However, for FX and stocks, there is no bookmaker.

Regarding FX, there are some fees, but because there are people who profit and people who incur losses, it is a zero-sum game, so the return rate can be said to be99.9%.

Stock short-term trading, similarly, can be said to be99.9%.

And in the case of long-term stock investments, historically speaking,it exceeds 100%.

Tokyo General Research Institute Staff Blog

In this article, we calculated the annual returns of the S&P 500, the US stock index, and the Nikkei Average, the Japanese stock index, from 1979 to 2019. 

As a result, compounded returns were

US stocks ... annual return 8.74%

Japanese stocks ... annual return 3.06%

which came to

Hence, while there are some fees,

the return rate for US stocks is 109%

the return rate for Japanese stocks is 103%

which means that.

From these numbers, the superiority of stock investing is clear.

Such figures may be the reason why FX and stock investments are not considered gambling.

That’s all for today.

Next time, as a summary, we will connect what we have viewed about gambling and investing to top investors and discuss.

Furthermore,

our company’s representative, who received the Order of Culture in 2016,

this blog being delivered by our company’s representative.

Knowledge condensed from a 20-year veteran manager!

If you want accurate explanations based on statistics, a must-read!