There are only two types of players in the market – Investors and speculators. Of course for many of us the line is very difficult to draw on a transaction to transaction. My investment in Hdfc clearly is as an investor, and my investment in South Indian Bank was as that of a speculator.
However to say what you do for 2 weeks is speculation and what you do for 2 decades is an investment is actually a convenient definition. Not a factual one.
Let us go to the big boss of investing Ben Graham. His definition of investing is clear:
“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Very good definition. Going by this I would think that at this time EVERYTHING that I can do now in the market is SPECULATION.
Equity markets do not look mouth watering, interest rates are at the same rate of inflation, gold has had a good run, real estate I do not understand – that leaves me with cash in the bank. Nothing else. I do not understand any other ‘asset’ class.
So it makes me go back to equity markets – which always has some share worth buying. However even when i bought Reliance recently for 790 or Bharti Airtel at 304 – sincerely I MYSELF lack conviction of these being ‘good’ investments. This is despite fund managers saying my decision is correct – from a reading of their portfolios, not by talking to them.
This has also led me to do a few speculative transactions (when I have a stop loss and not an averaging point, I call it speculative unlike Graham) – and all of them have yielded good results. In a couple of shares I fear my ‘time stop loss’ will be triggered if not the ‘price stop loss’.
So here is a caveat – I am revealing that the speculative element in my portfolio is now at the upper end of the limit – of 10% – but that is also because of the recency effect of some profitable trades. EEEEKKKK. This is the scream for the hurt that might happen if I continue to speculate.
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