Around the World in 100 Words
January, 2019; Week 4
Last week’s posting took a look at the history of equity markets since inception -the view from 50 thousand feet as its called. So I thought I’d bring it all back down to ground level with a look at the difference between speculating and investing. The link here nicely summarizes why the first doesn’t work and why the second does.
Speculation is an emotion-driven approach to building wealth which substitutes sound, informed economic considerations to hope and dreams. Speculation has a short-term time frame and the promise of getting rich quick. Investors who put their hard earned savings in speculative investments are the main character of the children’s story of Jack and the Beanstalk. As you will remember, the young Jack trades something of real value -his family’s cow- for beans which supposedly have magical properties. Yes, the story ends with Jack defeating the giant and climbing back down the beanstalk with the giant’s riches, but real life doesn’t work that way. The link here to how speculation ends badly for investors is worth a quick read.
Investing is an empirical-driven approach to building wealth, where the determination to invest is based on a diligent analysis of the economic fundamentals of the asset itself. Investing has a medium to long term time frame and the understanding that a diversified portfolio of assets intelligently selected will position clients for solid, risk-adjusted returns over time.
At First Capital Financial, we partner with leading Wealth Management companies including Dimensional, Edgepoint, Invesco and Mackenzie who invest well for you as our client. Their value is in their ability to analyze equity and fixed income investments and make intelligent decisions that contribute to your financial security and peace of mind. This, and not speculation is the way to living happily ever after.
See you next week!