More Stock Tips: Investor Vs Speculator
“An Investment operation is one which, upon thorough analysis promises safety return of principal (amount invested), and an adequate return. Operations not meeting these requirements are speculative” – Benjamin Graham. The Intelligent Investor
An investor’s focus should be learning and implementing strategies that ensure security of the capital, and an adequate return. Anything that is not focused on these two objectives is considered speculation or gambling. Note that not everyone in the market is an investor, even if they’re described as such.
Every investor must recognize that there is always a speculative factor in his/her investments and decisions, but must strive to minimise this, and may be psychologically prepared for adverse effects both in the short and long term. In all investments, the possibility of loss is very real, and an investor must be comfortable with this.
There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are:
(1) speculating when you think you are investing;
(2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and
(3) risking more money in speculation than you can afford to lose.
Buying a “hot” stock or buying in a “hot industry” is speculating or gambling, and shouldn’t be confused with investing. Always speculate on that which you can afford to lose.
Speculating can be a lot of fun while you’re ahead of the game, and if you want to have a go at it, put a small amount of money aside for this. Never add more money into this account just because the market is going up and profits are rolling in (however, whenever you make more, it’s advisable to take it out and invest it).
Never mingle your speculation and investment monies, even in your mind.
