(Summary: Chapter 4)
This chapter reveals the main idea of the author in the most accurate distinction between investment and speculation.
A fine line is drawn precisely in the aim of these operations. It is at this asset price that it has little effect on the investor’s decisions (like placing your capital in certain instruments regardless of the market price). The investor is primarily focused on sustainable, safe and lasting income from all of their operations.
At the same time, a speculator is most often looking for a “day market” for quick profits, moreover, actively using margin instruments in their high frequency operations. Because the main goal of a speculator is quick profit.
In modern terms, speculators are in permanent search of new “hypes”.
Investors, on the other hand, are always focused on sustainable development, secured and supported by thorough and multifaceted analytics of each asset. Therefore, they are armed with a specific strategy that naturally focuses on generating sustainable income.
This chapter also provides many conflicting examples, which are also relative in its nature, and can be mistakenly identified in one direction or another if you forget about the aim setting. If, however, adherence to one or another approach is clearly followed, then all examples become self-explanatory and do not need additional explanations.
It is worth noting that one of the most important elements of an investor’s strategy is diversification, portfolio management, as well as the readiness to rebalance their portfolio in order to maintain the required level of sustainable income.
The author emphasizes that the key difference lies in a more thorough fundamental analysis of securities against short-term transactions aimed at maximizing profits with a high degree of risk.
To summarize, I can conclude that the main nature of investments is long-term and safe retention of various kinds and an increased number of assets, as well as implying periodically affordable dynamic within the investor’s portfolio.