Investing vs Speculating - Owners vs Borrowers

  

First, let’s clarify these definitions.

Investing – is actually buying stocks, securities that ensures partial ownership of a company. By purchasing a share of the company, you become part owner, together with other investors owning the same stocks. The purpose of investing is keeping stocks for long period of time and receiving dividends, if the company is profitable. One of the most successful investors in the history is Warren Buffett. His genius investing strategies and tactics are explained in the book “Buffettology”, written by Mary Buffett. She was his daughter-in-law, who divorced his son and revealed all Warren's secrets in the book (sneaky, eh?). Be sure to read it. 

  Now about speculating. It’s buying a stake of securities and other instruments for a short period of time, at low price and selling it with an increase in their value, earning in this way on the difference in rates. The main advantage of speculating is that it often brings fast and serious income. There is no need to spend a long time on the market analysis and the study of the prospects of a company. Speculators work quickly, almost intuitively.

                                  

             About how speculations began to dominate the investment  

  This conclusion is made by John Bogle, founder of the first index fund, in his book "The Clash of the Cultures: Investment vs. Speculation". The culture of long-term investment is being replaced by short-term speculation, and the cost of stock transactions deprived of a significant part of investors profit. It is not profitable to invest anymore. Analyzing the clash of different financial cultures, the author calls for a return to the general principles of long-term investment, and warns of the consequences that are harmful to the state, society and investors. The book is extremely interesting, it explains the reasons of 2008 crisis and inevitable future crisis. Anyways, speculating prevails nowadays…

In my next posts I will describe tools, available for speculations.

             

                                   John Bogle: Investment vs Speculation