Jim's Investing Continuum

Let’s Be Honest: Are You an Investor or a Speculator?


With the stock market seemingly setting all-time highs every day even as bond prices crumple, this is a crucial time to clarify the difference between investing and speculating.

Unfortunately, that distinction — often credited to the great investment analyst Benjamin Graham — has never been entirely clear.

Every asset is an investment in some people’s hands and a speculation in others’. So it isn’t what you buy, but rather why you buy, that determines whether you are investing or speculating. In his classic 1934 book “Security Analysis” and again in “The Intelligent Investor” (1949), Graham wrote: “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory [or ‘adequate’] return. Operations not meeting these requirements are speculative.”

I used to regard that description as definitive, but I began to see its flaws a few years ago. Can any analysis ever be thorough enough to “promise” safety or a positive return?

The traditional view, dating back at least to the 19th century, is that an investor buys to capture a predictable long-term stream of cash flow, while a speculator buys to harvest a short-term change in price.
Comment: Click on the image above for larger. On the right is Mark Wahlberg from The Gambler . On the left is the Speculator. In the middle is the planter who patiently waits. Several have asked about my own investing strategies. Here goes:

  • Basically the speculator is the gambler but the gambler may just not care.
  • I try to "treat every nickel like a manhole cover"
  • I don't pay an investment advisor so right there I am saving myself 1% (or more). And I figure that I could be an investment advisor and I care more about my assets than another.
  • About "my assets" - they really are The Lord's. All came from Him - I must glorify Him. A practical outcome of this is that I do not hoard and I do not invest in companies such as tobacco stocks (although their returns are attractive as in MO or BTI)
  • The aforementioned The Intelligent Investor by Benjamin Graham is the definitive read.
  • I do not Day Trade. Never have. I doubt I could make $$ doing it. I regard it as gambling
  • I rarely trade any stock short term 
  • I don't trade Options. I've thought about it and have investigated it but have not and doubt I ever will.
  • If I don't understand what I am buying I pass on the investment
  • I research the company sufficiently to know something about it. I have many examples but here is just one. We think Cracker Barrel is a great restaurant and we have stock in it. 
  • I explain it and "sell" the investment to my wife. She has to agree.
  • It has to, there are exceptions such as BRK-B, pay a dividend.
  • I have to have some confidence that the equity will continue to pay a dividend.
  • Diversification: No one stock dominates. Although we are heavy into several stocks such as ED, JNJ, MMM, and KMB
  • I don't need to beat another investor. I'm not in a contest with another
  • I hope to have a combination of dividends + some growth. I'm happy with 5%
  • I am not looking for spectacular returns - sounds like speculate
  • I buy and hold
  • I try to live humbly (I have a 10 year old car with just about 100,000 m and a 15 year old truck)


  1. JP, do you follow the Bing Crosby investing philosophy of investing? We all know the 12 Days Of Christmas goes "The first day of Christmas my true love gave to me..." Bing Crosby has changed the song to "my true love SENT to me." I wonder if Bing knows something we don't and is trying to say that UPS is a good company to invest in? We have to SEND gifts to our true loves now, not give them to them. I respect Bing Crosby and I listen to what he says. I actually respect him more than I did before, since he can change music that he recorded, even after his death.

    1. It should be noted that there are all kinds of theories about the stock market, most of them derived from people trying to get some "secret" knowledge that will allow them to profit beyond their peers and avoid the hard work of selecting good companies with good prospects.

      12 Days actually dates back to at least 1780, so the correlation with today's stock market is speculative at best.

      UPS is a good deal simply because so many of us don't live near those we love, but that's a fundamental of the company, not anything to do with Bing Crosby or others associated with a song.

    2. Mr. Bubba, Bing Crosby and Burl Ives just changed their classic recordings of these songs in the last month or so. Of course, we all know that the one and only version of this song is "my true love GAVE to me." The fact that Bing could change his version in the last month to "my true love SENT to me" and that Burl Ives could change his version to "my true love BROUGHT to me" is amazing! If these guys have the ability to change their recordings after their death, you better believe I'm going to listen to them! Anyone that smart is worth listening to! I was only guessing at their meanings. I took it to mean that we should invest in UPS and Amazon, since both of these guys now highlight sending gifts instead of delivering them personally.

      It's similar to Sally Fields. Her entire life she has been known as Sally Fields, but in the last few months she has mysteriously changed her name to Sally Field. Anyone that smart who can mysteriously change her name without going down to the courthouse and filling out the forms is pretty smart. I might start listening to her for stock advice as well.

  2. Burl Ives seems to be getting in on this act as well. He changed his classic version of this song to, "my true love BROUGHT to me." He seems to be implying that his true love ordered something and had it sent to her house first so she could then bring it herself, instead of having it SENT. I wonder if Burl is saying that Amazon is a good investment?

    If these guys can both change their songs after their dead, you better believe I'm going to listen to them for investment advice. Anyone that smart has got to know what he's doing!

  3. I can't quite understand what Charles M. Shultz of Snoopy fame is trying to tell us. He is another genius. In the last few months he has changed his name from Shultz to Shulz. If you think Sally Fields if smart you would be correct, but the fact that Charles M. Shultz can change his name -after his death - is phenomenal! I can't make out his cryptic message. He dropped the "T" from his name, so is he saying that retail sales in general are also going to drop, or lose some momentum? Peanuts merchandise is sold at retailers all over the world.

    Normally I wouldn't take my investment advice from the Peanuts guy. But you better believe that anyone smart enough to change his own name after his own death is a genius and worth listening to!


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