Know Thyself

What is the difference between investment and speculation?

Many practitioners have considered this question. Is it the time frame? The instruments? The actors? In our experience, the line is clear: the difference between investment and speculation is internal versus external orientation. Investment is a reflective exercise, and begins by asking yourself what your goals and limits are. Speculation is an external activity, and begins with a search for profits.

So an investor begins by formulating a plan. A speculator looks for a hot tip. An investor can often handle a setback in stride. A speculator frequently gets discouraged if things go wrong and wants to bail out. Investors are usually in things for the long haul. Speculators are here one day and gone the next.

The ancient Greeks knew that wisdom begins with self-understanding. Call it the ant and the grasshopper, the tortoise and the hare, or whatever. In the long run, investors usually end up with what they need-because they’ve taken the time to know what they need.

Douglas R. Tengdin, CFA
Chief Investment Officer
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