Are Jews allowed to make stock market investments?
It has been a common conception that playing the stock market is a form of gambling. Gambling is usually considered unethical by some religions. While economists may argue that there is no connection between gambling and investing in the stock market since it is a constructive way to invest savings, the view is not unanimous. Renowned English economist John Maynard Keynes compared the stock exchange to a casino. However, this assumption may not entirely hold true when closely scrutinized.
The main objective of the Torah is to promote individual spiritual development and not the efficiency of the capital markets. According to the Talmud, there are two ethical problems posed by gambling. The Mishnah disqualifies a habitual gambler from giving testimony. The Talmud then goes to ask what wrong a gambler has done. In giving the answer, the wrong that a gambler does is that the winner takes advantage of the loser, who may not be fully aware of the adverse odds he faces. Thus, gamblers will have contempt for productive work because of the easy ways they get money. Therefore, the gambler is considered not to respect ethical and legal sanctions because to him, life is a game and a gamble. This is especially true in casinos where the environment can be considered as that of immorality and immodesty. However, can the same be said of the stock market?
It is true that there are some excesses in the stock market as evidenced when media exposes some under deals in securities trade. However, this problem should not be perceived as endemic since most business establishment also suffers their own problems. It is also true that some unscrupulous brokers will take undue advantage from unsuspecting investors. However, these cases are rare and most of the brokers will be well informed about the investments they make for their clients. It is also evident that those investing in stock markets are committed to social stability and are no different from other workers in other professions. About every profession faces ethical challenges, and workers, especially in the financial markets, need to exercise special care to escape the strong lure of greed.
What about the speculative activity?
The aim of speculators is to buy assets at low prices, hoping to profit by selling them when prices increase. While economists are of the opinion that speculators are vital to the economy, they are viewed with suspicion by popular opinion. However, while Jewish religion does not inherently condemn speculation as unethical, it does have genuine considerations for popular sentiment. Nonetheless, speculation is economically productive because it encourages efficient allocation of resources. For example, speculators may hoard commodities anticipating for a future shortage. When this happens, there will be adequate stockpiles when the shortage occurs. In addition, speculation contributes to the effective exploitation of scarce resources in modern competitive markets.
Nonetheless, when left unchecked, speculation may be harmful to the economy. There have been cases where speculators collude with the market to create an artificial shortage with the aim of inflating prices. This may be harmful since instead of alleviating hunger, it creates it. This is why speculation, when viewed from the perspective of human consequences, raises ethical issues. Talmud censures hoarding not because of the economic consequences, but the likelihood of humans suffering tragic consequence which may lead to the destruction of solidarity in the society. When speculators take this route, they are only concerned about enriching themselves. The end result is the exploitation of common hard working people who may not afford to meet their needs because of high prices, and thus end up facing abuse and enslavement.
It is therefore our duty to unify our economic and human interests so that we are not enticed to quench our greed and betray our ideals. For example, we may consider a player in a football team about to play a game. If his team wins, he earns a huge sum of money, but if they lose, his earning will decrease. According to economic theory, it would be more advisable to bet against his own team. This may be considered a betrayal of loyalty since it is like betting on a disaster. While Jewish law does not regulate most kind of speculations, it is the duty of an individual speculator to ensure they are “not betting against the home team.”