Investing vs Speculating

I’ve never really known what to consider myself in terms of what I do with my money. I haven’t considered myself an “investor” because I have never bought a single stock in my life. I had never thought of people as “speculators” until I read The Intelligent Investor (which Warren Buffet says is the best book ever written on investing).

I’ve never bought a stock because I’ve always felt it was a crapshoot. If I didn’t have the time or knowledge to fully investigate a company, their history, their market, their earnings/financial position, then I felt like I was just rolling the dice by buying some of their stock. I was never sure why I felt this way, I just always thought it was silly. I mean, my opinion has always been that the reason you hear all the time about the stock market on the news is because there have been people who have gotten rich off the stock market. The problem is, and what 95% of people don’t realize is, that the ones who got rich were the ones selling their companies, not the ones buying the stocks.

Mark Cuban wrote a blog entry recently that explains fairly well how I’ve felt for a long time. I just didn’t know that was why I felt how I felt about “investing” (or, speculating, as he elegently explains). The Intelligent Investor also explains my feelings fairly well.

I have felt for a long time that if I have extra cash laying around, my choices with that money can and will affect my financial future. If I choose to put it in mutual funds or the stock market, I’m basically rolling the dice. Maybe 1 in 12 will be good for me. However, if I take that money and invest it into a company that I start, or use it to fund a company that I’m involved in, then I’m much better off long term. I think that most people think their companies are going to make a bunch of money when they start them. I’m the same way. Why would I invest in the stock market and hope to get a 10% return on my investment anually when I can invest that money in funding a company of my own and get a 100% ROI anually, or monthly (both of which I have experienced in the past year).

I now realize that I am not (or trying not to be) a “speculator”, and that I am an “investor.” I put money into companies with which I have intimate knowledge. I know who’s managing them, I know their backgrounds, I know what’s going on in their markets. I know because they’re my companies.

I know this isn’t possible for everyone, but it is possible for a lot more people than who actually do it. The stock market is the easy and exciting way out. It’s also the more difficult way to make money.

One of my goals is to make this opportunity available to more people through providing education and business opportunities for them.

Hopefully I can do some good.