Investing versus Speculation

Investing... The concept of investing is often misunderstood. Greed and impatience are probably the primary reasons that investing is an illusive concept for most people.  When your investing expectations are too high, investing becomes speculation. 

Speculation... What is speculation?  Speculation is nothing more than gambling.  Speculation often means you are willing to accept greater odds of failure in return for greater potential rewards.  Speculation is not investing because it often results from one or all of the following situations: 1) your odds of failure are greater than your odds for success, 2) you could potentially lose all of your initial capital, 3) you do not understand what you buying, and 4) you expect what you are buying to increase in value substantially over a short period of time.       

As best described by Benjamin Graham in the classic book, The Intelligent Investor (1985), “investing is much different than speculation, requiring enough knowledge, margin of safety and passage of time to make an individual reasonably sure of a positive outcome.”  Follow this advice and the likelihood for investing success is high.