Do you know the difference between Speculation and Investment?
Do you like HOT stock tips?
Are you waiting for that piece of information that only a few, select people know?
Do you invest in something because your family or friends are doing it?
Have you lost money on a 100% guaranteed investment?
If you answered yes to any of these questions (and many like them!) you are a speculator - or at least have engaged in speculative behavior at some point.
Investors are not speculators.
What's the difference?
I would say the main difference is mindset. Investors are looking to get rich over time. Speculators want to get rich now! Am I saying you can't make money speculating? No. Some people have made enormous fortunes by speculating - but many more have gone broke!
Although investing can take time, you can't help but grow your wealth if you do it long enough. Warren Buffet - arguably the worlds most prominent investor - has this mindset. Warren doesn't speculate. He buys stock in companies he understands (due diligence) and then holds them for DECADES. If you look at his investments, many of them haven't made spectacular returns. They have made good returns, over a long period of time. Because Warren buys solid companies and holds them over the long term he doesn't gets sucked into the boom and bust cycles that many other 'investors' deal with. We can argue about the method but you can't argue with the result!
Investors look at the upside and downside of where they put their money. They assess the potential risks and the potential returns. Why potential? Because nothing is guaranteed. But - if we do our homework we can maximize our returns while minimizing our risks. By performing our due diligence we can safely project what an investment can return based on market fundamentals.
Speculation on the other hand is more about luck and timing. It's about taking a huge bet on an uncontrollable outcome. It can definitely be a way to strike it rich - or lose everything you have. We just aren't comfortable watching our hard earned money disappear on a roll of the dice.
Many people think they are investing when really they are speculating. Buying a home in the hope that it will appreciate in value so you can sell it for more than you purchased it for is speculation. This is one of the major factors that caused the great recession in 2008. People we seeing house prices increase and thought that all they needed to do was get into the market and buy something. House prices would always go up - after all, that's what all the experts said.
Unfortunately the music stopped and suddenly many well meaning people were left holding property that was worth less than they paid - a lot less. That's what speculation is and we all know the terrible financial and social pain that caused. It was exciting becoming a 'real estate investor' for many people until they found out they were actually 'real estate speculators'.
This is why we created Boring Investments. We invest in solid, stable, income producing properties. We buy in long term markets that continue to grow and produce great returns with minimal risk.
We scrutinize every aspect of a deal and deliver you the best possible return on your investment.
Boring Investments. Exciting Returns.