Value Investor versus Speculative Investing

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While you contemplate a major investment decision, you need to ask yourself if you will be making a value investment or a speculative investment. You can use Benjamin Graham’s extensive writing about the difference between value and speculative investments to categorize potential investments you are considering.

Speculative investors buy a stock with a hunch that the price will go up or down quickly. 

Value investors buy a stock after determining the long-term value of the business.

Although value investors outperform speculative investors in the long-run, value investors do not expect to outperform the market. Value investors accept the reality that no one can predict market behavior; instead, value investors work to control their own investment behavior.

Do you find that you are more of a value investor or a speculative investor?

So before I make a trade I ask myself how easily I will be able to sleep at night, or as Benjamin Graham puts it, I ask myself if the trade promises “safety of principle and a satisfactory return.”