There is nothing wrong in being a speculator. There is a lot MORE to gain being an Investor. However, you need to know whether you are a speculator or an investor. I have a friend who has 3 portfolio managers managing his portfolio. Each has to handle about Rs. 10 crores each and each of those guys have a different mandate. One of them has to day trade – and can take delivery ONLY for a week if need be.

YOU should know whether you are a speculator (news is to be devoured on a daily basis!) and when you are an investor you need to ignore the NOISE in the market. Not easy to wear 2 hats!

If you try to forecast how certain news events will impact the future as it relates to the stock market you are a speculator as I have explained above.  There is NO ESCAPE. For example, the person who could “see the financial crisis coming”  in 2008 should have “seen it going away” in 2009. Not many people saw both.  I personally thought 9000 on the sensex was the max that it could fall. However I did not see it going back to 15000 in a few months time. I just did not. I met many people who “got it right” and pulled out of the market in 2007 and 2008 and avoided the financial crisis.   HOWEVER, they kept their money out of the market far too long and ended up losing more than had they invested and rode through the ride to 9000. I sold LG Balakrishna – partially – at Rs. 1000, but DID not have the sense to buy it at 900. Now it is back to 1040…thus not really gaining much from the ‘shorting’. Luckily I sold only 10% of my holding and not the entire holding.   If you speculate on the market getting out, you are obliged to speculate on getting back in.  Not many people are consistently good at that. I know, I am one of those guys!! I get the sell timing right many a times – but I am not nimble enough to get in again.

So this issue forces us to decide what kind of investors we want to be.  If you are a long-term investor, you have to accept short-term volatility. You need to do some meditation and wait for the long-term success.

When you are investing for your Retirement, I am assuming that you are an investor, not a speculator.

Not knowing how the market can behave can hurt you real bad.

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  1. Thank you for the important insight in this post!
    BTW, the last line would have more punch if written:
    Not knowing who YOU are can hurt you real bad.

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