Investor Vs Speculator

In the present day scenario most of us assume that we are investor. Are we really one? What set an investor apart from speculator?

An investor is one who analyses the companies fundamentals, cash flows, assets, liabilities, long term vision, management quality and many more aspects before owning a part of business. Mostly one only invests if one would want to own such a kind of business someday. Whereas a speculator is someone who owns the paper pieces for a short duration of time and waits for the stock prices to rise to gain some profit. It is more a fluctuation and quick profit game.

Most of us are attracted to quick profit. It reminds of the line by Basant Maheshwari in his book the thoughtful investor, “Paisa jaldi banana hai ya jyada banana hai” – “Do you want make quick money or a huge amount of money?“

Why do most of us are attracted to speculation?

The answer lies in a 1930 book, Watch Your Margin. The author ask someone, “Do you know why people go into speculation?”

“To make money” – the person replied.

“Not at all. They go in for pleasure of getting something for nothing. What they want is a thrill. This is why we drink bootleg whisky, and kiss the girls, and take new jobs. We want thrills. It’s perfectly human, but Wall Street is a poor place to look for thrills, for the simple reason that thrills in Wall Street are very expensive.”

Turning the wheels around it is all about psychology at the end of the day. Being an investor one needs patience, which we lack more in the digitized world, where everything is just a click away.

To quote Sir John Templeton, “The four most dangerous words in investing are: ‘this time it’s different.”

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