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Stock Investing & Trading is NOT Gambling, What's the Difference?

Stock investing and trading are often compared to gambling as they both involve opportunities as well as risks for financial gain.


Investing does not mean gambling
Pic source: rivankurniawan.com

In fact, there are several things that clearly distinguish between trading and gambling from the legal, method, goal, and regulation aspects.


What are the differences?


Key Differences

Stock Investing & Trading

Gambling

Legal according to applicable law (Law of the Republic of Indonesia Number 8 Year 1995 on Capital Market)

Illegal and prohibited by the state (Law of the Republic of Indonesia Number 7 Year 1974, The Indonesian Criminal Code (KUHP) Article 303, etc.)

Relying on market research such as fundamental and technical analysis

Relying on speculation aka sheer luck

Takes time and process to make a profit

Tend to expect instant and easy profits

There is an application of sharia principles based on the DSN-MUI fatwa

Not Shariah compliant in any form of application

Sharia Capital Market at a Glance


The implementation of sharia principles in the capital market includes the issuance of the Sharia Securities List (Daftar Efek Syariah / DES) and sharia stock indices such as:


  1. ISSI: An sharia-compliant composite index whose constituents are all stocks included in the DES.

  2. JII: Consists of 30 of the most liquid sharia stocks.

  3. JII70: Consists of 70 of the most liquid sharia stocks.

  4. IDX-MES BUMN 17: Contains 17 sharia stocks from state-owned issuers (BUMN) that are assessed based on liquidity and fundamentals.

  5. IDXSHAGROW: Contains 30 sharia stocks that have a growth trend in net profit and income relative to price with transaction liquidity and good financial performance.


Sharia stocks must meet a number of criteria:


  1. Issuers do not conduct business activities that are prohibited according to sharia: Gambling, trading with false supply/demand, riba-based financial services, buying and selling risks that contain elements of uncertainty (ghahar) such as conventional insurance, providing goods or services that are haram and mudarat, and transactions that contain elements of bribery (risywah).

  2. Issuers must meet financial ratios: Total interest-bearing debt compared to total assets of no more than 45% and total interest income and other non-halal income compared to total revenue and other income of no more than 10%.


Smart Investing


Don't get the wrong idea if someone says that stock investing and trading is the same as gambling!


Gambling only relies on "fortune", while investing and trading require thorough knowledge and research. An investor or trader must conduct in-depth analysis, understand market conditions, and apply the right strategy to achieve profits.


Let's become smart stock investors & traders💡


 

Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).



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