INVESTING VS SPECULATING – WHY INVESTING ISN’T ANYTHING LIKE THE MOVIES
Like most people, a lot of what I have learned in life is learned from watching it in movies. Unfortunately, movies have a way of bending the truth in the interest of a good story. I have watched a lot of hockey games in my time and sadly I am still yet to see a flying V or a Knuckle-Puck!
It seems investing in the stock market is really no different. When I tell people that a lot of my personal investments are in the share market, I usually get met with the same questions. Aren’t you scared you will lose it? Which stock should I pick? Do you have any favourites? These good natured but ill-informed questions likely come from the way investing is portrayed in movies and on the news.
Speculating vs Investing
The good natured people asking me the above questions are likely referring to what is known as ‘speculating’ which is how people tend to invest in the movies (and in some cases real life). Speculating in its simplest form is the process of investing in stocks, property, or other ventures in the hope of a gain but with the risk of loss. It can involve picking a stock you think is going to go up and betting big on it hoping you can make a win (this is sometimes referred to as going long). A person can also bet the stock is going to go down and ‘short’ the stock which is basically the opposite of going long.
Now speculating is a perfectly acceptable form of investing but don’t get confused, it is akin to informed gambling. This type of investing is high risk and high reward and not suited to your average investor.
Generally when people ask me about whether they should speculate on the sharemarket, I explain to them that there are people out there who have dedicated their lives to this and can still lose. If you’re happy to take the loss then go ahead, but this isn’t the type of investing that I recommend.
At Bounce Financial we are about sustained, responsible investing over the long term. You see, historically the share market as a whole has gone up over time. In addition, shares pay regular ‘dividends’ which add to your investment value. When you receive investment advice from Bounce Financial, you will be provided with a recommended investment strategy which takes advantage of this general increase in shares value and depending on your risk tolerance, may include funds that involve a degree of speculating by deviating from an index.
At Bounce Financial, we don’t recommend investments which are going to make you huge amounts of money in a short period but carry substantial risks of you losing it all. Instead, we see investing as a life-long commitment with smart, regular reviews and changes to fit the ever changing market.
This post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.