What does the investor differ from the speculator in?
Appeals “to become the investor“, “to earn money in stock market“ and “to invest the money in MMM“ and the other companies promising high and even “the guaranteed income“ is a sad sign of the present. Sometimes I am strongly surprised by human nonsense.
In my understanding “investments“ and “speculation“ are very different concepts. For descriptive reasons I will give a simple example: to buy commercial real estate in the good place and to lease it is an investment. To take shares cheap and to sell them then expensively - it is the most usual trade.
It is trading, it is speculation , but not investment in any way! It is very high risk to lose the money, it is gambling, this casino, it is a roulette.
The modern stock market has obviously expressed speculative character that leads to what remains less actions in which to the private investor should invest the money.
I will quote Benjamin Graham who by right is considered the founding father of the financial analysis on securities market and is the author of the book “ Reasonable investor “.
He considers that “investment operation is the operation based on the careful analysis and ensuring safety of the main sum of the invested capital and the acceptable profitability its uses. The operations which are not meeting these requirements - are speculative“.
Two basic rules of investment
Paraphrasing the aforesaid words, one may say, that the task of the investor is in that in all possible ways to seek to avoid losses, i.e. to keep the invested money.
About it two basic rules of investment removed by Benjamin Graham and which received the name “ protection against fools “ say:
the Rule first - not to allow losses.
the Rule second - not to forget the first rule. As we see
, these two simple and very evident rules in a root contradict assurances everywhere of the bred brokers and teachers of training centers at various investment and Forex - the companies that the private investor - to the trader should learn “to skalpirovat “ - i.e. to make a large number of trade operations ( with actions, currencies and pr .) and to earn from a difference of the prices.
We already sorted in first part of this article what leads such behavior on share to ( currency, commodity ) the market - to inevitable loss of the invested capital.
It is possible to argue and break, of course, long a spear around semantic loading which bear in themselves the terms “ investor “, “ speculator “, “ trader “. But why to spend on it the time? At whom you study
Ya I follow such rule of the choice of the teachers and mentors - I always look at their results.
Benjamin Graham and his follower Warren Buffett visually proved (showed) viability of their theories in practice. U. Buffett is already many years one of the richest people of mankind.
And here teachers and the staff of various investment companies drive for work the cars taken on credit and cannot brag of multimillion states.
So why to them then to listen? to become same how they?.
And what is chosen by you?