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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  1. Dear Subra Sir,

    From what I heard lately, it seems all investment in equities is speculative and not investment. Have already sent you an email so won’t repeat it here again. Please respond, you are the only credible source that can clear my confusion.:D

    email was sent to subramoney.rich@gmail.com.

    Thanks

  2. What differentiates your blog from other blogs is the human part. Liked the post a lot. Learnings from the post:
    Speculate but have a upper end of the limit : 10%

    You have raised valid point
    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.
    For those who do not speculate what to do?

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