| The nightly news and the blogosphere are all | | | | want to become rich without taking on too much |
| abuzz about the current economic crisis. Has the | | | | risk. That dichotomy creates an inherent conflict, |
| market hit bottom yet? Where are the | | | | between managing our financial assets and our life. |
| speculators putting their money now? What does | | | | Wake up and smell the coffee! You simply cannot |
| Warren Buffett (a.k.a. the Oracle of Omaha) think | | | | have it both ways. If you want to become rich in |
| about all this? The next financial catchphrase may | | | | life, forget about investing in sure things- you |
| well be "WWWD?" (What Would Warren Do?) | | | | need to speculate. Be prepared to win, but also |
| We think that Warren would agree with our | | | | be prepared to lose. Recognize that life is a game |
| position that a clear understanding of the | | | | of chance and get accustomed to living with that |
| difference between investing and speculation is | | | | uncertainty. But do it wisely. |
| essential. And an understanding of both concepts | | | | Speculators fuel recoveries |
| will have a profound impact on the way you | | | | These days, we face an uncertain economy, not |
| make decisions - about a lot more than just | | | | only in America but across the world. Yet, in a |
| money. | | | | very real sense, speculators are the best thing |
| Certainly, when you think about "investing" in real | | | | that can happen to an economic recovery. |
| estate, you are actually speculating, considering | | | | Speculators will take risks the rest of us cannot |
| that the return you will get from the property is | | | | afford, or stomach. And at the very time when |
| anything but certain. When you think about | | | | fear is afoot in the land, and people are struggling |
| "investing" in the stock market for the long term, | | | | with a broken economy, speculators are the real |
| you are actually speculating, considering that there | | | | "white knights" who pump liquidity into the |
| are no guarantees you will get the expected | | | | economic recovery - in order to ride the next |
| dividend or that you will beable to sell the stock at | | | | uptick into profits. |
| the higher price you thought you would when you | | | | Like it or not, we are surrounded by speculation in |
| purchased it. | | | | an ever increasing complex globalized, Internet |
| When you "invest" in precious metals as a hedge | | | | connected, fast-paced world. That is a "good |
| against inflation, you are actually speculating, since | | | | thing," as Martha Stewart would say. And when |
| you have no idea if indeed inflation in the future | | | | you understand the bigger picture, you'll have |
| will be high enough to attract further buyers into | | | | more reasonable expectations and a better handle |
| the metal and thus push the prices much higher. | | | | on what you're actually doing and what you can |
| But, the confusion between investment and | | | | expect with the use of your money and your |
| speculation is not just confined to financial assets. | | | | decisions in life. |
| What about your own business? When you were | | | | If you choose to take some risk - and we |
| looking for start-up capital, did you ask your | | | | encourage you to take some risk - let it be |
| partners, family members or friends to consider it | | | | rational, so that you don't overpay for something, |
| as an investment or a speculation? If you put 100 | | | | or confuse an investment with what actually is a |
| percent of your own money, did you and your | | | | speculation, without being compensated enough |
| conscience agree that this was going to be a | | | | for taking that higher risk. |
| "great investment?" | | | | How to speculate wisely |
| A curious dichotomy | | | | The key ingredients needed to speculate wisely |
| Most people are risk averse by nature, yet these | | | | are to:o Base your decisions on a calculated |
| same folks unknowingly take on risky financial | | | | analysis and rational judgment of the risks |
| commitments and life endeavors, when they | | | | involved. Play to win!o Develop a sharp mind and |
| should not. Generally this comes from failing to | | | | be willing to go against the crowd. Go contrarian |
| understand the difference between an investment | | | | and buy when everybody sells. However, be |
| and a speculation- or confusing the latter with | | | | prepared to be patient in order for your bet to |
| outright gambling. | | | | play out.o Go with your own idea whenever they |
| We dream about saving for retirement, hoping | | | | tell you it's crazy and will not work. But know |
| for a comfortable "nest egg" by putting aside | | | | when to give up. You will come up with other |
| funds in U.S. Treasury notes or corporate bonds | | | | good ideas and just need one to really hit it big!o |
| of highly- regarded corporations. But as we have | | | | Learn from your mistakes. If you happen to fall, |
| learned, the sad reality is you won't become rich if | | | | rise like the phoenix, that mystical bird that never |
| you buy instruments that barely return a cash | | | | dies! But, don't fly too high- always keep your |
| flow above the inflation rate, (if that). And recent | | | | feet on the ground. |
| events have made it clear that the corporate | | | | Look at it this way: You've got to take your shot |
| bond market is far from a sure thing. | | | | if you want to reach your financial goals. But |
| The lyric to an old song says, "Everybody wants | | | | please let your rational brain run the show. If you |
| to go to Heaven, but nobody wants to die." | | | | let your emotions drive your desire to become |
| There is a parallel when it comes to taking risks. | | | | rich, or give in to the herd mentality, you'll be |
| We are averse to risk, but at the same time | | | | gambling - and that is not the way forward. |