Are you investing or gambling?

ASX shares have been one of the best ways to invest over the past century. However, many people don’t achieve those returns because they treat investing as gambling.

What’s the difference?

Dr Shane Oliver, the head of investment strategy and chief economist of AMP Ltd (ASX: AMP) Investments, recently wrote an article that included several useful investment quotes.

One that particularly appealed to me was from economist Paul Samuelson, who said: “Investing should be like watching paint dry or watching grass grow. If you want excitement…go to Las Vegas.”

The short-term is gambling

No one knows with certainly what share prices are going to do tomorrow, next week or next month. We can hope that our shares go up in the shorter term, but that’s not certain – we’d need a crystal ball to know exactly when and how share prices are going to move.

Putting money into the ASX share market with the thought of making a profit in a week is like betting on red at the casino. It may happen, or it may not.

Long-term investing is the way to go

But, if in 2014, we had said that the long-term profit outlooks for Apple and Alphabet were compelling because of the increasing amount of smartphones, the growing internet usage and so on, we’d have invested in two of the world’s best businesses at good prices, setting us up for strong long-term gains over the next decade.

In my opinion, the more time we put into a quality investment, the more likely it is to pay off.

Good businesses have a habit of growing profit and justifying higher share prices over time.

Companies like Wesfarmers Ltd (ASX: WES), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), TechnologyOne Ltd (ASX: TNE) and Premier Investments Limited (ASX: PMV) have been growing their profit (most years) for a long time, which is why long-term shareholders are sitting on significant capital gains and are regularly seeing dividend growth.

It’s a good idea to own these sorts of winners for many years to allow compounding to work its magic.

As Warren Buffett once said:

Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

Foolish takeaway

If we invest for the long term, we give ourselves the best chance of making satisfactory returns.

Occasionally, there will be bear markets, which we can’t control. But, those times of market distress can be the best period to invest for low prices, despite the fears.

The post Are you investing or gambling? appeared first on The Motley Fool Australia.

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More reading

• Is it too late to buy Soul Patts stock?
• 3 things about Wesfarmers stock every smart ASX investor knows
• Here are the top 10 ASX 200 shares today
• 5 ASX shares to buy for an effortless path to financial freedom
• 3 ASX 200 shares I think could grow to be bigger than BHP one day

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Technology One, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers. The Motley Fool Australia has recommended Alphabet, Apple, Premier Investments, and Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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