Are You Investing or Speculating?
Here's how to tell the difference ... and when it's actually OK to speculate in the stock market.
Do you feel hesitant to put more of your money in the market because it feels like a gamble? Even seasoned investors can get nervous about investing their hard-earned money, because all investments come with risk.
And for most people, the thought of losing the money you worked hard to earn is far more painful than the chance of possibly earning more.
But here’s the thing: If you’re investing wisely, you can mitigate your risks through the right strategies, like appropriate asset allocation and diversification. You still risk experiencing temporary losses, but it’s not the same as taking your cash to the blackjack table.
Some people, though, treat investing that way. They throw money into the market without a plan, without a strategy, and without the proper safeguards in place to protect against unnecessary risks.
In other words, they don’t invest at all. They speculate, and they often experience wild swings and major losses in their portfolios as a result.
About the Author
Founder and CEO, Define Financial
Taylor Schulte, CFP®, is founder and CEO of Define Financial, a fee-only wealth management firm in San Diego. In addition, Schulte hosts The Stay Wealthy Retirement Podcast, teaching people how to reduce taxes, invest smarter, and make work optional. He has been recognized as a top 40 Under 40 adviser by InvestmentNews and one of the top 100 most influential advisers by Investopedia.