There are many avenues for us to get rich. First, we need some spare cash, but what’s next?
Do we go to a betting outlet and try our luck with 4D, Toto or Soccer? After all, we just need a dollar or two to place a bet!
How about visiting the Turf Club and bet on which horses will win the races? Again, placing a small bet may mean we win big time!
Perhaps, we should be more adventurous and try our luck at one go at Genting or Macau. That will save time, and we can concentrate better!
Too lazy to go out? How about placing a call with our broker or just go online to buy and sell stocks, warrants, bonds, gold or unit trusts? In fact, anything buyable or sellable under the sun. It’s easy!
Doesn’t all those actions above seem similar? First, we pick a target. Then, we hope that we are right and win some money. In that case, what really is the difference between speculating and investing? Do we really know what we are doing?
In fact, it is not surprising that many “investors” are just speculators. They have no idea what they are buying, they think they can “beat” the market, and they do not know how much risk they are exposed to with their “investments”.
Side-track: I’m always amused whenever I come across advertisements in the newspapers that claims Mr. X or Miss. Y managed to make lots of money within a month or perhaps a few months. By relying on their superb skills using special trading techniques and analysis, we can supposedly grow $10,000 to $100,000 easily. And they want to teach us how to do so! So very generous of them. :)
CashBench has never responded to any of these advertisements. It’s just too good to be true, and these people charge very high fees for their “secrets”. :) Furthermore, are these people teaching investing skills, or are they encouraging speculation? What really is investing?
“If we “invest” and strive for a profit above 15% within a short time, we are likely to be speculating.”
Investing is making use of our spare cash to make a reasonable profit while exposing ourselves to an acceptable level of risk. What is reasonable and acceptable varies from person to person. However, as a CashBench rule-of-thumb, if we "invest” and strive for a profit above 15% within a short time, we are likely to be speculating.
For example, Mr Tan may have just spent $5,000 on a stock and hopes to sell it at $6,000 two months later for a profit of $1000. Easy money, he say, and it’s a potential profit of 20%. Cool! But Mr Tan is most likely speculating on that stock. If his mind is set on speculating, it really doesn’t matter how he does it, be it through the stock market or elsewhere. Mr. Tan could just as easily have placed a bet in a Casino on tai-sai and have a high chance (close to 50%) of getting a 100% return in just two minutes.
In fact, whenever we get a large profit within a short period, we have exposed ourselves to a large amount of risk. This is always true, and there are no exceptions. There is really no such thing as easy money with little or no risk. We can just as easily lose $1000 for the chance to gain $1000. The next time you “invest”, ask yourself: Am I speculating? How much can I afford to lose?
Luckily or not, it’s not easy for someone to tell at a glance if you’re speculating. Only you yourself will know, and CashBench advises that you invest, not speculate.
Email to Friend
Your comments?
Post a Comment