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Ian Hilton Company analysis - 16631_p40_44_columns.qxd 6:32...

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leaving I met a friend of my wife’s whose cleaning lady’s son has a friend whose uncle worked for a grain store whose manager knew the husband of the part-owner of this horse. She said they hoped it would win, so I put my last $5 on it. It won, so I’m happy.” “I cannot understand people who gamble,” said Tom. “And to risk your last money on such vague information begs my belief. Look, I won’t talk any further about your stupidity for gambling, because here comes Harry, my accountant, and I want to discuss my share portfolio with him.” “Just a minute, just a minute,” said Dick. “You have just told me how stupid gambling is and now you tell me you ‘play the stockmarket’.” “But the stockmarket is not like gambling,” protested Tom. “ The Oxford Dictionary defines ‘to gamble’ as ‘to take great risks to secure great results in … finance etc.’ Y ou’re looking happy, Dick,” said Tom. “Why shouldn’t I?” replied Dick. “I just had a win. I put $5 on a horse which won and paid $410.” “Me, I don’t gamble,” said Tom. “I think it’s foolish but I’m happy that you won more than $400 today.” “Well, I would have but I had lost $400 on the pokies at the Casino this morning.” “I now move my opinion from foolish to stupid,” said Tom. “Why do you do it? You know you can’t beat the machines.” “Some people do,” retorted Dick. “All you need is luck. This morning I thought I would just play a few games. I won $100 on the first spin.” “Then why didn’t you take it and leave?” asked Tom. “I was going to,” said Dick, “but I thought I’d just have another go, and I won again. I knew I was on a roll and decided to play my luck. I don’t know what happened but I was down $400 when I realised I had only $5 left. I needed that for my fare home but as I was AUGUST/SEPTEMBER 2004 NATIONAL ACCOUNTANT 040 STUDENTS WORTH THE GAMBLE? IAN HILTON
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STUDENTS 041 NATIONAL ACCOUNTANT AUGUST/SEPTEMBER 2004 “Isn’t that what you do with your investments?” said Dick. “Harry,” said Tom, “Help me. Tell Dick I’m not gambling when I invest in shares.” “Well, you are taking a risk. Life is full of risks. What I have done with your share investments is to try to minimise the risks because I know you are a very cautious person,” said Harry. “But people lose money on the stock exchange,” said Dick, “just like the casino.” “There is a basic difference, said Harry, “between when you invest in the stockmarket and when you gamble. It is true that many investors use the stockmarket as if it were a gamble. However, consider what happens when you invest in a business – that is, buy shares. You buy a claim on the assets of the business and a share of the profits it may generate. Too often investors think of shares as a trading vehicle and forget that shares represent the ownership of a business. The value of a business is a complex matter but successful ones will build wealth and income for their owners.
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