Have you considered the possibility that what you've called "investment" could be more accurately described as plain and simple speculate? If you adopt this approach, you probably have more reasonable expectations about money are you going to do - and realize that almost all investments are actually a speculation.
The words "investment" and "speculation" is mistakenly used indiscriminately.
The words are often misused and misunderstood. Even worse, sometimes people will consider an economic opportunity for sure when it called an investment (real estate is a typical example), when in reality, the so-called investments are actually speculation. The mortgage-banking crisis, the Wall Street bailout, and its worldwide wave power are good examples to drive this point home.
Wikipedia, the online resource where definitions are part of a wide-open digital landscape in constant flux, offered this definition of speculation: "The process of selecting investments with higher risk to benefit from an expected price movement."
If speculators are considered at greater risk takers than investors, so what do you make of players? Here's the difference: The wily speculation using logic and research data to identify the most promising profit opportunities in the market. He understands the complexity and unpredictability in the market or any game that involves venture capital, for that matter, and studies of the underlying forces that cause the market to fluctuate either up or down.
In short, the wily speculation taking a calculated risk. On the other hand, they play, whether a player in the financial markets, casinos, race tracks or sports arenas, is either a casual, compulsive or professional player. His behavior is the most important: the compulsive gambler's, driven mainly by emotions, a tendency to just jump in and out, trying to beat the house for a quick and easy profit. This type has a tendency to play hunches and leap without looking.
In contrast, the professional player makes a living using mathematics to analyze games of chance. The tools he uses may include the probability of anticipation and game theory.
The "safe investment" is a myth
It can be confusing trying to differentiate between investment and speculation in any financial transaction, including commodities, mutual funds, stocks, bonds, real estate or business deals. This confusion hamper your ability to calculate what the true expectations of returns should be. It could cause you too much of an opportunity and take unnecessary risks or even irrational.
Understanding that the investment is a myth is crucial when deciding where to commit your capital. In the long run, the decisions you make today will affect your ability to create wealth in the future. If you're looking for a place to put your money with the dream of high returns, we warn you about the effect of herd mentality and how it has led to the ruin of so many - not just in recent days, but throughout history .
You have to learn how to spot the common-sense danger signs, and remember that if something sounds too good to be true, it most likely is. That way you will not read your own history, when someone writes about the next bubble to burst. Just think of the chaos created by real estate bubbles, the Wall Street Meltdown, bank failures and bailouts and the imaginary box "investment" disappears in a puff of smoke.
Essential: A well-planned strategy
None of this is meant to deter you from speculating-far from it. But if you decide to go together to ride on the next market uptick, has a well-planned exit strategy in advance. And a thorough understanding of the big picture, then you have reasonable expectations and a better grip on what you actually do with your money.
And we encourage you to take any risks. There are plenty of good examples of successful speculators and risk-taking innovators who knew where to look for opportunities. And just as many heart-rending accounts of ill-fated investors who were quick to buy-in, but failed to make a timely departure.
Keep your eyes wide open, though. And treat your achievements as a return of speculation. If you
start from the standpoint that it's all speculation, you'll be less inclined to take irrational risks, have fewer unpleasant surprises, and have more reasonable expectations.
Co-authors Jose D. Roncal and Jose N. Abbo share some 50 years of senior executive experience in international business, finance and economics. Both have authored numerous articles on business strategy, finance, accounting, capital markets and the global economy. For more on the authors and their book, The Big Gamble: Are You Investing or Speculating?, visit: http://www.financialspeculation.com/
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