INVESTING VS SPECULATINGi (55, move, depression, respect)

[mathjak107]

i see from those that are afraid of loosing money in any investments references to how folks lost it all in the down turn or how they cant take any risk because if they did they would rather loose it at las vegas.

its important to understand the difference between investing and speculating.

you still have to only take the risks that let you sleep at night but even taking no risk has risk.

speculating is when you think your smart enough to outsmart the markets ...your going to pick just the right asset class at just the right time and in your mind you are going to get the signal from the magic powers to get out and move into the next asset class
.

speculating is when you you buy a few stocks that are not diversified across all industries and sectors and hope you picked the right ones

speculating is when you buy only equities or gold or cd's or whatever it is you think you will make money in because you have this gut feeling or a friend who gives advice told you to and then you keep your fingers crossed that world and economic events go your way

speculating is keeping all your money in the bank and hoping inflation stays negative so that after taxes and inflation your not loosing spending power each year..

for me speculating is when i buy individual stocks and i know im not smart enough to pick just the right company,at just the right time, in just the right sector, in just the right industry ,in just the right market sentiment and knowing i dont even know what the competitors have on their drawing board .
but i do it because it looks like a buy or im sure its the next google .


on the other hand investing is merely accepting the returns the markets give us each year without trying to think your smarter and you will beat the markets

investing is when we hold enough equities that all individual company risk is out of the equation.. if one company folds its not even a blip to your net worth.

investing is covering all the asset classes all the time. if nothing is going down in a bull market you my friend are not diversified enough..

anyone who thinks they will switch asset classes right before things change in the economy will not do it successfuly over time.

investing and diversification is never saying im sorry, i didnt see that even coming.

remember its always the things not even on the radar that kill markets...the biggest , worst drops come from the best of times, when nothing bad is even on the horizon yet.

all the biggest gains are from the depth of hell when the word invest wants to make you vomit.. we just had our first less bad employment report (aug 2009) , by the time that news came out the markets have already risen 3200 points since the march lows..

anyone who thought they would get back in when things looked a little better missed one of the biggest partys in history..


they are stll sitting with their losses from bailing out near the lows and complaining how the markets made them poorer.

look no one knows what the future will bring but one thing stands a good chance of happening.. in over 100 years of history long term money meaning 15 years out always had a nice return no matter what happened in the short term and since we all have money thats not being used to eat for in the long term we all have long term money unless we are well into our 80's already.

investing never rules out uncertainty , it allows for it.


90% of my money is invested but i do keep 10% out for speculating... its fun to try to outsmart everyone else because afterall thats what your doing when you make money and they dont.. but alass that only works until it dosnt and then you usually give it all back over time but when your up its a hell of a great feeling

[texdav]

Your investing when you put mney in something you can control like a buiness. Staok are in the end speculating as many have found with little person control.

[mathjak107]

tex there are things even buying a business you cant control...look at all the failed businesses from todays events..

one thing has nothing to do with the other, buying a business is something you should do if thats what you want... investing is what you do to have the money your business earned keep working for you , its passive... i dont want to own my own business, i want my money to still work for me though. i dont want to retire and own a business, thats work... i want my investments to work for me. as an investor for over 20 years now my investments have averaged a better return a year then i even earn most years on my job.

the owner of my company dosnt believe in investing, he buys businesses but while he makes great money he also has to devote lots of time to them, they are not passive but require work....

ideally you need both.

[mathjak107]

Originally Posted by texdav

Your investing when you put mney in something you can control like a buiness. Staok are in the end speculating as many have found with little person control.

well i dont know how your investment track record is but i can tell you i know thousands of people who are investors and have done just awesome over the decades...i also know many very broke business owners or former owners

[TuborgP]

Which is the safer investment or riskier speculation?
A. Putting up $100,00 to open a restaurant business.
B. Investing $100,000 in a SP index fund.

Option B you can hold for 20 years while option A may well not give you the luxury of time to make it work.

[mathjak107]

ill venture to say there are alot more people who invested their life savings in a small business and had it fail and now they are broke then investors who put the same amount into just simple index funds..

[lchoro]

everything in the first post is speculating. speculating is purchasing something in the expectation that someone will later pay you a higher price for something. investing takes into account the value of the income stream generated by the underlying business. the difference between speculating and gambling is the speculator appraises both the upside potential and the down side risks before getting in, and takes steps to control his risks. the gambler does not manage risks.

[mathjak107]

there actually is no real definition , it is interpreted to mean different thing by different folks... i kind of have the same view as author harry brown witth a few additions. pretty much thats what i posted..


respected famous economist john maynard keynes the father of modern economics had a completely different definition

Investing vs. Speculating

the dictionary may have its own meanings.

for me investing is when you try to rule out things happening to your money by counting on one particular asset class or that one economic condition will play out a certain way instead of planning for uncertainity .

anyone who only buys stocks can be considered a speculator by some because your attempting to bet that stocks will go higher ruling out the 3 other economic possibilities. or maybe you will consider it investing if instead of guessing which will be the next hot sectors or stocks you merely pick a total market index fund. some may define it as when you dont attempt to beat the market and only get market returns instead of thinking your smarter. .. i prefer to consider me investing and not speculating when i dont bet on any particular economic outcome... while stocks plunged last year my "permanent portfolio" of stocks,gold, long term treasuries, cash were up.... to me thats investing....

in fact in almost 40 years that mix had 3 down years and a staggering 8-9% average return, will it continue? beats me but logic tells me that anything that happens in the world that is strong enough to have one of those 4 catagories down by 1/2 is strong enough to have one of the other catagories soar by double or triple since each part of my portfolio responds very strongly to an economic event.

there are only 4 economic events that can play out, by allowing for them all thats my definition of investing as it applys to me

recession
inflation
depression
prosperity



want to see speculating at its worst? all your money in a bank, cd, or money market.you are guaranteed a loss, 100% guaranteed after taxes and inflation with no hope of coming out ahead and you havent bet on a thing... want to see a train wreck ? try a little higher inflation then we are used to in that idea if you are generating your income off that money with no other investments .

while yes the 2 terms can be used interchangeably to be successful in making money passivly you need to give yourself guidlines, rules and structure. as many found out merly throwing money into a 401k choice because your buddy picked those choices is not a plan... its not structured and you have no rules or guidelines ... dont like any of the above definitions ? , create your own and post em. ....

[mathjak107]

Originally Posted by lchoro

everything in the first post is speculating. speculating is purchasing something in the expectation that someone will later pay you a higher price for something. investing takes into account the value of the income stream generated by the underlying business. the difference between speculating and gambling is the speculator appraises both the upside potential and the down side risks before getting in, and takes steps to control his risks. the gambler does not manage risks.

interesting definition and i cant say your wrong... there is truth to that and it certainly fits as one definition of it... ... im of the take that everything we do in life is a speculation from even crossing the street to planning tomorrow nights dinner and assuming i will still be alive. i tend to be a little more focused in just what is it in speculating that gives us the greatest odds of making money or at the least not loosing purchasing power during one of those 4 possible outcomes for the economy, i tend to label that as investing