trading in the manner of an investor, not as a speculator
These are those manners of trading:-
1. Never follow the day to day fluctuations of the stock market. The market only exists to make it easier to buy and sell, not to set values. Keep an eye on the market only for someone who is willing to sell a stock at a not-to-be-missed price.
2. Don’t try and analyze or worry about the general economy. If you can’t predict what the stock market will do from day to day, how can you reliably predict the fate of the economy?
3. Buy a business, not its stock. Treat a stock purchase as if you were buying the entire business, using the following tennets:
Business Tennets
1. Is the business simple and understandable from your perspective as an investor?
2. Does the business have a consistent operating history?
3. Does the business have favourable long-term prospects.
Management Tennets
1. Is management rational?
2. Is management candid with its shareholders?
Financial Tennets
1. Focus on return on equity, not earnings per share.
2. Calculate "Owner Earnings".
3. Search for companies with high profit margins.
4. For every dollar of retained earnings, has the company created at least one dollar’s extra market value?
Management Tennets
1. What is the value of the business?
2. Can the business currently be purchased at a significant discount to its value?
4. Manage a portfolio of businesses.
Intelligent investing means having the priorities of a business owner (focused on long-term value) rather than a stock trader (focused on short-term gains and losses).
I'm still not convinced there is a vast difference between these two terms - especially when it comes to the topic of the share market and one of the richest men in the world.
The main difference revolves around risk, the usual suspect when it comes to making money. The higher the risk the higher the profits. Secondary to this is the time or period that a share will be held before selling on.
Investing relates to long term less risky while speculation is short term higher risk. How long that period is to redefine your role from speculator to investor is an unknown factor. The risk factor is also fairly subjective. The difference implies that to invest you will buy stock based on a solid current market value and trend and then hold onto it no matter what, or at least until it looked to be a real problem, while the speculator would watch the daily scenario and sell at the moment a profit was realised or put in a stop loss scenario.
Now anybody who has set out to invest in the stock market and have a balanced portfolio of shares that are blue chip , sound and just great will probably have the intention of just maintaining the values, keeping the returns above inflation and ensuring that the portfolio keeps ticking along and does not go down the tubes given a recession.
The speculator sets out to make a buck - grow the portfolio the dividend rate and returns beyond anything else that the market may have to offer. He has to know stuff and be in and out and account for this on a daily weekly basis. He could be a gambler of note and the good guys at this become the rich guys.
The question I have is - at what stage does an investor become a speculator? Is the one a progression from the other or are they both the same given different values for time and risk?
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