The picture you see above is the site of the future Integrated Resort (also known as: the Casino@Sentosa) near the northern shores of Sentosa formerly known as Pulau Blakan Mati.
The thin line between investing and speculating in stocks and shares
The stock market is a place where money can be made and lost and both at the same time as every transaction is a match at the price that the buyer is willing to buy and the seller is willing to sell at each point in time. When you have a clear investment objective and your reasons for investing appear sound you are investing. You are trying to grow your net worth and to get a better return than inflation from buying shares in a business. If you are buying shares (or short-selling them) with a goal to make a quick dollar within minutes, hours or days, you could be gambling in the stock market.
Seasoned investors sometimes joke that an investment is a speculative trade that has gone sour. :-)
The thin line between investing and speculation can boil down to what is your intention at that moment in time. In reality, no-one but yourself knows that true reason why you buy/sell that share and it could be due to fundamental analysis, technical analysis or fortune teller’s advice depending on your information sources for decision making.
Enjoying the occasional windfalls from gambling on the stock market
I enjoy the occasional punt in the stock market as well. While the majority of my portfolio is in blue-chip companies with impeccable businesses, I do punt for quick gains. I do this because I also love a game of chance, and the stock market does provide that avenue. Let’s be honest here, many of you buy the occasional 4D, TOTO or Big Sweep ticket all in the guise of “charity” and helping the less fortunate in society but in reality there is something in our brains that responses to the interesting situations where you can make/lose money.
I do not advocate this approach as one of the ways to achieve financial freedom but I have found that investing can be made interesting with the occasional punt. However, such punts should be limited to small amounts say 5%-10% or less of your portfolio and you must set very clear targets for cutting loss or taking profit. This is pure gambling except that it goes under the guise of investing. So be very clear that speculation is gambling and if you should be adult enough to understand the risks and returns from such speculative activity. No one is asking you to punt and in fact, the point of this post is to say unequivocally that speculating is gambling and is VERY VERY RISKY.
I make the occasional punt to see if I can read market sentiment well for a given stock at a given point in time. Also, I see this as my way of earning some pocket money for little luxuries in life such as a nice meal in a restaurant or the occasional gadget. This keeps the investing game a little interesting for me and adds that flavour to my understanding of the market.
The road to financial freedom is long
The road to investing takes patience and perseverance. It is long and it is hard. For me, the occasional windfall from punting on short term speculative activity on a very small portion of my portfolio is one way to take additional risks for potential additional returns. I also do this to learn to read the market better over time and limit myself to occasional punts and limit my exposure to less than 10% of my portfolio. It also trains me to be less emotional about cutting losses and to be more controlled in when I enter/exit specific counters.
Each one of us travels on the road to financial freedom in different ways. I do not claim that my way is the right way or the better way but I can see my net worth growing every year.
Your financial freedom, your rules.
Be well and prosper.
Source: Five Cents Ten Cents