Speculation begins where certainty ends05.11.2010
Speculation begins where certainty ends
Many financial glossaries define investment as an honest seeking of return while speculation is defined as a dangerous gamble. They are wrong. Investment, speculation, or doing nothing; all financial strategies contain considerable risk. Financial professionals are paid to take risks and remove worry. Consider however that no one cares more about increasing and preserving your money than you. To misquote Ben Franklin's famous phrase on liberty - He that gives up control of his money to gain safety will lose both money and safety . We all understand that human fallibility can not be eliminated by decisive words. Yet listen closely to financial advise and you will hear most investment advisors handle uncertainty by sounding certain. Professionally managed long term investment has great risk (pdf by Mandelbrot and Taleb) precisely because it sounds honest, rational, and above all, safe. Our definition of speculation: following a system of reasoning trying to discover opportunity (an edge) from within inconclusive evidence -- acting upon that reasoning - and then reacting to fresh information when required. Are you worried about your investments? If you are not worried -- your money is already in danger. Worry is respect for risks that threaten your future. Don't try to hide from unavoidable risks, instead embrace and manage risk. If you are not worried, you are not risking enough. Most investments seem safe, but undisclosed and hidden risks are stealing your money. You need to understand your own ventures, Don't depend on even well meaning advice from a third party. You need to speculate, not just invest. |
