The Difference Between Investing and Speculation

So, I'm reading the latest edition of The Intelligent Investor by Benjamin Graham. In it he describes the difference between investing and speculation. According to Graham, investing requires these three elements:

  • you must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock;
  • you must deliberately protect yourself against serious losses;
  • you must aspire to “adequate,” not extraordinary, performance

Any activity that does not include all three elements is speculation, not investing, and oneshould expect money used for such purposes to be essentially lost if not for luck.

Some folks may be taken aback by such a strict definition. In the book Graham berates Wall Street for softening the definitions. Day traders are hardly investors. They are speculators.

Pretty interesting insight, and I'm only a few chapters into the book.

Amazon.com links:

Josh Poulson

Posted Thursday, Dec 16 2004 09:13 PM

Adjacent entries

Main

« More Moveable Type Fun
SFO Handgun Ban »

 

Categories

Business

Trackbacks

To track back to this entry, ping this URL: http://pun.org/MT/mt-tb.cgi/284

There are no trackbacks on this entry.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)




 


 

Affiliate advertising

Basecamp project management and collaboration

Backpack: Get Organized and Collaborate