06/16/2021
"... Benjamin Graham, author of the classic books “Security Analysis” and “The Intelligent Investor.” That June, complained Graham, the Journal had run an article headlined “Many Small Investors Bet on Further Drops, Sell Odd Lots Short.”
He wrote: “By what definition of ‘investment’ can one give the name ‘investors’ to small people who make bets on the stock market by selling odd lots short?” “If these people are investors,” asked Graham, “how should one define ‘speculation’ and ‘speculators’? Isn’t it possible that the current failure to distinguish between investment and speculation may do grave harm not only to individuals but to the whole financial community—as it did in the late 1920s?” Graham said, “Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook.” However, he warned, it creates three dangers: “(1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.
”“ ‘Investor’ has a long history in the English language as a catch-all term denoting people who commit capital with the expectation of a return, no matter how long or short, no matter how many or how few investing columns they read,” WSJ Financial Editor Charles Forelle said in response to my complaints. “Back at least to the mid-19th century, ‘invest’ has even been used to describe a wager on horses—an activity surely no less divorced from fundamental analysis than a purchase of dogecoin.”
I hear you, Boss, but I still think you’re wrong. There’s no way the Journal would say a recreational gambler is “investing” at the racetrack just because a dictionary says we can.
(Please consult an advisor, this is not advice for you. Investing has risk. We are not making recommendations here)
Understanding the difference between speculation and investing is essential to avoiding reckless risk.
