Realistic Investing Vs Speculative

Warren Buffett defined the difference between investing and speculation in this famous passage from his book, The Intelligent Investor:

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels, at which he would be wise to buy, and high price levels, at which he certainly should refrain from buying and probably would be wise to sell.

 

This statement can apply to the new wave in investing, binary options. This is a loose example of how binary options work; the premises is to state whether or not a stock or commodity will go up or down in the next ten minutes. Although this is a rather pedestrian look at the inner workings of binary options, this is basically the way you play the hand.

 

If you picked up on the poker, or card game reference, this is what binary options sum up to be, yet another casino game.

 

Currently on the trading floor a lot of speculation has been transpiring. Many investor newsletters are giving their predictions for stocks, commodities, etc. to have in their portfolios.

 

When choosing to invest you will have to have a proven earning strategy to see a return on investment. Not matter how you look at investing you will always be speculating or projecting on a number of factors.

 

Studying the cycles is also a proven strategy to help increase a return on investment.

Everything in nature has a cycle. To better understand the cycle of things is to watch and make note of changes.

 

The changes could be obvious or very subtle. Noting the changes in the cycle we can then project what will likely happen next.

 

The housing and commercial housing market also have a cycle, when the prices go up drastically in any given area that same area have a hard bottom. Examples would be Stockton, CA and the Inland Empire.

 

The house prices in those areas where going up up up almost everyday by leaps and bounds. Then suddenly the market in those same areas fell down just as hard.

 

The Inland Empire was a growth area in the late eighties then became a declining area a short time later. Fast forward to the late nineties, the same area was growing past its highest peak. Then with all things fell as sharply as it went up.

 

If you were to invest now in the Inland Empire the starting strategy would be to hold the property knowing it will appreciate as in times before, and then sell the property right at the peak or slightly before the peak.

 

The stock market also has a pattern because all things in nature follow a cycle. This is one of those rare times when all really does exist. But also note within a cycle are also more cycles contributing to the larger cycle.

 

In real estate the job market fell in the early nineties with companies cutting back to purchase stocks back from their investors. For our current housing market the down turn initiated from the sub prime lending and over extension of credit; similar to the late eighties early nineties.

 

So with all cycles now is the low time in the market, the time to buy and hold. Appreciation is waiting