Investing versus Speculation

 What is the difference between investing and speculation?

Benjamin Graham addressed the differences between them on the very first page of his book, The Intelligent Investor.

Graham wrote, "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return."  

Based on this definition, there are three components to investing:  

• thorough analysis, 
• safety of principal, and 
• adequate return.  

Graham added, "Operations not meeting these requirements are speculative."

To this, we can add:

(1)  Any contemplated holding period shorter than a normal business cycle (typically 3 to 5 years) is speculation, and 

(2) any purchase based on anticipated market movements or forecasting is also speculation.

Value investing meets Graham's definition of investing, addressing on:  its focus on individual company analysis to determine intrinsic value,  the margin of safety concept, and its success over the long term.

The distinction between investing and speculation is important for a reason Graham cited in 1949 and remains true today:  "... in the easy language of Wall Street, everyone who buys or sells a security has become n investor regardless of what he buys, or for what purpose, or at what price...."

The financial media often refers to "investors" taking profits, bargain hunting, or driving prices higher or lower on a particular day.  However, these actions are rightly attributed to speculators, not investors.

Investors and speculators approach their tasks differently.

Investors want to know what a business is worth and imagine themselves as owning the business as a whole. Unlike speculators, investors maintain a long-term perspective—at least 3 to 5 years. They look at a company from the perspective of owners. This means they’re interested in factors such as corporate governance, structure, and succession issues that may affect a company’s future and its ability to create wealth for years to come. Investors may use their voting rights to assist in enhancing company value over the long term.

Speculators, on the other hand, are less interested in what a business is actually worth and more concerned with what a third party will pay to own shares on a given day. They may be concerned only with short-term changes in a stock’s price, not in the underlying value
of the company itself.

The problem with speculation is simple:

• Who can predict what a third party will pay for your shares today, tomorrow, or any day?  

• Stock market prices typically swing between extremes, stoked by the irrational emotions of fear and greed.

Focus on the long term business value

Such dramatic price fluctuation on a day-to-day basis can test long-term investors’ mettle in maintaining their focus on business value.

• Remember, the tendency is for business values day-to-day to remain relatively stable.
• Day-to-day price changes should hold little interest for the long-term investor, unless a price has fallen to the “buying level” that represents a sizable margin of safety.

But that’s often difficult to remember when newspaper headlines, TV news anchors, friends, and coworkers are lamenting or lauding the market’s most recent lurch forward or back.

Investments and Speculations: Similarities and One critical difference.

Financial-market participants can be divided into two groups,

• investors and 
• speculators.

Similarly, assets and securities can often be characterised as either

• investments or 
• speculations.

Both typically fluctuate in price and thus appear to generate investment returns.

But there is one critical difference:

Investments throw off cash flow for the benefit of the owners; speculations do not.

The return to the owners of speculations depends EXCLUSIVELY on the vagaries of the RESALE MARKET.



Examples:

Investments, even very long-term investments, will eventually throw off cash flow:

• A machine makes widgets
• A building is occupied by tenants who pay rent
• Trees on a timber property are eventually harvested and sold.

By contrast, speculations, like collectibles, throw off no cash flow; the only cash they generate is from their eventually sale.  

• The future buyer is likewise dependent on his or her own prospects for resale.
• The value of collectibles, therefore, fluctuates solely with supply and demand.  
• Collectibles have not historically been recognized as stores of value, thus their prices depend on the vagaries of taste, which are certainly subject to change.
• The apparent value of collectibles is based on circular reasoning: people buy because others have recently bought.  This has the effect of bidding up prices, which attracts publicity and creates the illusion of attractive returns.  Such logic can fail at any time.

Speculation

http://www.slideshare.net/thadeshvar/basics-of-wealth-mgt

Investing is NOT Speculation

There is a difference between speculation and investing.  

One distinction defined this by the length of time over which the investor expects to realise their investment; or to put it another way, how quickly one expects to make money.  

Speculation is high-risk-get-rich-quick territory.

Investing is managed risk over long periods of time where you can acquire wealth slowly.  

[  I am an investor by nature, not a speculator.
I am in it for the long haul, and having bought many good shares at fair or bargain prices in the past and presently, I intend to hang onto to them.
My view is that they will move yet higher over time.
Sometimes, the massive and largely unprecedented increase in the share price of my stocks over a short period was not anticipated by me or probably by many others.
So, did I get lucky?  Well, yes and no.
It was my view that the share price of these companies would rise further or eventually recover from recent corrections, whilst the past is no way of accurately predicting the future, I felt that it would rise to around a certain price in the medium term.
The difference between my expectations and what happened is that I would have been happy for it to return to that price within five years.  As it happened, it did so in less than a few months.  ]

Differences between investment and speculation

Differences between investment and speculation

1.  Investment:  Investment is rationally based on the knowledge of past share price behaviour.  From such knowledge, it is possible to compute the probability of future return.  

• A common method of investment analysis is to study the past range of PER or DY of a particular share or a class of shares. 
• From this study of its past price range, we can predict the likelihood of its price being out of this range in the future. 
• By comparing its current price with the expected future price range (future price = future PER x future earnings) we know whether the current price is too high or too low and take the necessary action accordingly.

Speculation:  Speculation is purely based on the HOPE that the future price will be higher rather than on anything tangible.

2.  Investment:  Investment requires an investor to do some work before hand and decisions are made based on known facts and figure.  

• Such work typically may consist of estimating future level of Earnings Per Share and computing the past range of the PER. 
• By multiplying the future EPS with the likely PER, we have an estimate of the future level of price. 
• If the present price is very low compared with the future price, we buy and vice versa.

Speculation:  Speculation is usually based on wild rumours and unsubstantiated hearsays which cannot be checked for accuracy.  Undoubtely, speculation is a lot easier than investment but one tends to reap what one sows.

3.  Investment: Investment is made for the long term (i.e. two years or more)based on the idea that one is much more certain when one is trying to predict the cumulative results of many daily movement.  Once invests with the knowledge that over the long run, the real investors will always make a gain.

Speculation: Speculation is usually for the short run (i.e three months or lessunless one is caught whence a speculator is then forced to become an investor), based on the idea that certain events may result in a rise in price (bonus, rights, takeovers, and others).

4.  Investment: Over a long period of time, true investment tends to produce a positive result.  Based on many years of research in the US and Europe, Long Term Investment consistently produced much higher return than fixed deposit or the inflation rate.  The Malaysian experience has mirrored the Western experience.

Speculation: Since speculation is not based on anything concrete, its result is not at all predictable.  Speculation can occasionally produce very high gains just as it can produce very high losses.  Over a long period of time, speculation is most unlikely to produce better return than true investment.  

5.  Investment: True investors can sleep soundly at night since they have a fairly good idea of the possible extent of their loss and gain before hand. Besides, since they are investing for the long term, they can forget about short term movements and ignore the market most of the time.  

Speculation: Speculation is likely to lead to many sleepless nights and anxious days since its result is so uncertain.  The speculator will have to be always on the alert to take the necessary quick action to catch the right moment. 

Previously posted in this blog on SUNDAY, OCTOBER 25, 2009

1929 Wall Street Stock Market Crash

Knowing and Setting the Upper Limits of Share Price

The P/E also can be used to establish a cap on intrinsic value.

While asset values set the lowest level for estimating intrinsic value, the P/E can serve as an upper limit.

The P/E ratio establishes the maximum amount an investor should pay for earnings.

• If the investor decides that the appropriate P/E ratio for a stock is 10, the share price paid should be no more than 10 times most recent yearly earnings.

It is not wrong to pay more, Graham and Dodd noted; it is that doing so enters the realm of speculation.  

• Since young, rapidly expanding companies generally trade at a P/E ratio of 20 to 25 or above, Graham usually avoided them, which was one reason he never invested in some new start up stocks, though he used and was impressed by their products early in his career.

A Pricey P/E

High Pricey P/E

A company may be selling at an exceptionally high P/E because it is considered to have remarkably good prospects for growth.

No matter how high the quality of the car you are looking at, there is a price at which it is no longer worth buying.  No matter how junky a car is, there is a price at which it is a bargain.  Stocks are no different.

Some stocks with high multiples work out, but investors who consistently buy high multiple stocks are likely to lose money in the long run.

Often the highest multiples are present in a bull market which increases the risk.  

Graham and Dodd observed, " It is a truism to say that the more impressive the record and the more promising the prospects of stability and growth, the more liberally the per-share earnings should be valued, subject always to our principle that a multiplier higher than 20 (i.e., 'earning basis' of less than 5%) will carry the issue out of the investment range."

It is not wrong to pay more, Graham and Dodd noted; it is simply that doing so enters the realm of speculation.

Margin of Safety Concept in Speculation and Investment

A Criterion of Investment versus Speculation

Since there is no single definition of investment in general acceptance, authorities have the right to define it pretty much as they please.

• Many of them deny that there is any useful or dependable difference between the concepts of investment and of speculation. 
• We think this skepticism is unnecessary and harmful. 
• It is injurious because it lends encouragement to the innate leaning of many people toward the excitement and hazards of stock-market speculation. 
• We suggest that the margin-of-safety concept may be used to advantage as the touchstone to distinguish an investment operation from a speculative one.

Probably most speculators believe they have the odds in their favor when they take their chances, and therefore they may lay claim to a safety margin in their proceedings.

• Each one has the feeling that the time is propitious for his purchase, or that his skill is superior to the crowd’s, or that his adviser or system is trustworthy. 
• But such claims are unconvincing. 
• They rest on subjective judgment, unsupported by any body of favorable evidence or any conclusive line of reasoning. 
• We greatly doubt whether the man who stakes money on his view that the market is heading up or down can ever be said to be protected by a margin of safety in any useful sense of the phrase.

By contrast, the investor’s concept of the margin of safety—as developed earlier in this chapter—rests upon simple and definite arithmetical reasoning from statistical data.

• We believe, also, that it is well supported by practical investment experience. 
• There is no guarantee that this fundamental quantitative approach will continue to show favorable results under the unknown conditions of the future. 
• But, equally, there is no valid reason for pessimism on this score.

Thus, in sum, we say that to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.


Ref:  The Intelligent Investor by Benjamin Graham

CHAPTER 20  “Margin of Safety” as the Central Concept of Investment

Also read:

• Margin of Safety Concept in The Business Venture of Buying and Selling Stocks
• Margin of Safety Concept in Conventional and Unconventional Investments
• Margin of Safety Concept in Speculation and Investment
• Margin of Safety Concept in Diversification
• Margin of Safety Concept in Undervalued or Bargain Stocks
• Margin of Safety Concept in Growth Stocks
• Margin of Safety in Good-Quality and Low-Quality Stocks.
• Margin of Safety Concept in Common Stocks
• Margin of Safety Concept in Bonds and Preferred Stocks

Speculative-Growth Stocks - Conclusion: Numbers Matter

Some investors like to have a gut feeling about the business they are buying.

In the speculative-growth market, unfortunately, that's often difficult.  

Many of these companies are bringing new concepts to market, and in the case of Internet companies, they're doing it in a new and evolving medium.

Experience can be a poor judge of their viability.

Five years ago in 1994, it would have been hard to believe that an Internet company (Internet?  What's that?) would have a market capitalization of more than $100 billion by the end of 1999.

And that may be a good lesson for investing in the speculative-growth market:  Trust the numbers, not your gut.

Sure, Yahoo is a risk.  The Internet is still evolving, and could look very different a few years from now.

But a disciplined analysis of its financial statements indicates that Yahoo is making increasingly efficient use of its assets, generating consistent sales growth, increasing net margins, and delivering cash from operations.

That's what we want from a speculative-growth stock.


Comment:  The Internet bubble burst in 2000.  To make profit in your investments, valuations and earnings were as important then as now.

Mr. Market

MR. MARKET

“Common stocks have one important investment characteristic and one important speculative characteristic. 

Their investment value and average market price tend to increase irregularly but persistently over the decades, as their net worth builds up through the reinvestment of undistributed earnings. 

However, most of the time common stocks are subject to irrational and excessive price fluctuations in both directions, as the consequence of the ingrained tendency of most people to speculate or gamble”.

- Benjamin Graham

Why Return on Equity Matters

Let's say you want to open a whole chain of restaurants.

In the early years of building your business empire, you will be adding to your capital base aggressively.  

But because of the costs of opening restaurants, you will probably take losses; most companies in their formative stages lose money.  

If after a few years you have sunk $500,000 into your restaurants but are losing $50,000 annually, your return on capital is negative 10%.

It is not necessarily bad for a company to earn a negative return on equity - if it can earn a high return in the future, that is.

An investor will stomach a negative 10% ROE for his restaurants if he believes they can earn much higher returns in the future.

The trouble is, in a company's rapid-growth phase, when returns on equity are most often small or negative, it is tough to separate a good business (one that can earn a high ROE) from a bad business (one not able to).  After all, each is losing money.

Analyzing such companies means asking questions like

• "Is this a company with enough pricing power to eventually command a premium price for its product?"
• And "Is this a company with enough of a cost advantage that it can undercut the competition?"

It means, in other words, asking whether the company's business can either generate a high net margin (profit/sales) or a high asset turnover (sales/assets), the two key components of a high return on capital. 

Margin of Safety

Even after you think you have a good handle on what a stock should be worth, it is important to buy at a discount to this estimated fair value to give an adequate margin of safety.

After all, no projection about the future is foolproof, and protecting yourself from unforeseen events is entirely prudent.

For instance, if a company's new product falls flat and profit growth doesn't materialize, you want to be protected.

It is also important to realise that some companies are riskier and harder to predict than others.  In general, the riskier a company is, the larger the margin of safety should be.

The bottom line is that if you don't use a lot of discipline and conservatism in figuring out the prices you are willing to pay for stocks, you will regret it eventually.  

You might be able to sell some of your overvalued shares to some sucker who is willing to pay an even more inflated price, but in the end, this kind of speculating is the investing equivalent of musical chairs, with the last one holding the stock the loser.  Don't let it be you.

Buy at a price below fair value with an adequate margin of safety and sleep well at night.

The essence of value investing

Speculation is where you might willingly pay more for a stock than it’s actually worth, in the hope of passing it on to a ‘greater fool’ at an even higher price.  It is a very dangerous game to play.   It is rather like chain letters and ‘ponzi schemes’: some people will make money along the way, but sooner or later most will find that there isn’t in fact a greater fool after all. 

And because a stock’s intrinsic value will ultimately be realised, the net effect for all investors of buying stocks above their intrinsic value will be a loss, while the net effect for all investors of buying stocks below their intrinsic value will be a gain.

• 12 Apr 06

The word value comes in for a lot of abuse these days. You’ll often hear that ‘so and so is a value investor’ or that ‘such and such is a value share’, but it’s not always very clear what these things actually mean. For some it’s all about buying shares on low PERs; for others it’s about buying tangible assets for less than their book value; while still others claim that a stock like Cochlear can offer value, despite a PER of 36 and a price to tangible book value of 9.

So what’s the theory that can tie up all these loose ends? 

Old as the hills

The idea of value investing is, in fact, as old as the hills—or at least it’s as old as the people that have lived on their slopes. Take the ancient Yir Yoront people of the Cape York peninsular for example. They desperately needed stone axes for a whole range of daily activities: collecting firewood, making tools, building huts and climbing trees to gather honey (for an idea of how this might work, head along to the woodchop arena at Sydney’s Royal Easter Show). Yet, living as they did on a flat alluvial coastline, they didn’t have the materials or the know-how to make these vital tools.

In fact, the axes were made from a dense basaltic rock found close to what is now Mount Isa. This rock could be chipped easily into shape, but it maintained its sharp edge well, and it was skillfully crafted into axe heads by the Kalkadoon people. But the Kalkadoon lacked the stingray barbs they needed to make their preferred style of spear—which was excellent news for the Yir Yoront who lived and breathed stingray barbs.

So the stingray barbs flowed down a trade route from the north, in exchange for the stone axe heads that flowed along in the other direction. As the items got further from their source, their value increased.

A Yir Yoront would perhaps have given a dozen stingray barbs to secure one axe head, while a Kalkadoon tribesman might have offered a dozen axe heads for one stingray barb. Somewhere between the two, you might have found someone exchanging seven axe heads for five stingray barbs, in the knowledge that he could keep one barb and swap the other four for eight stone axes on the other side of his territory (keeping one and leaving seven to sell).

Value finds its own level

The increase in the price and value of the items as they moved along the trade route was a reflection of the effort needed to get them there. Everyone in the chain added enough labour capital (either producing goods or transporting them) to secure the items that they needed. If someone decided it was worth walking the extra 50 kilometres to get an additional stingray barb in return for his surplus axe heads, then he might do just that. And if someone tried to charge more for his stingray barbs than they were worth in his region, then the trade route would soon find its way around him.

Value, like water, finds its own level. Sooner or later, the true value of something—in terms of what it can do for people—will be recognised. And that’s the essence of value investing: you aim to buy something for less than it’s worth, so that you can keep a portion of that value for yourself when it comes to be realised. Indeed, as our ancient traders showed, value is not so much an investing strategy as the very force that keeps markets ticking along.

But when the items you’re trading have their price quoted minute by minute throughout the working day, something strange seems to happen. People start to care less about the value of the items themselves and become fixated instead on where they think their prices are headed.

At a basic level, that might be a matter of imagining that a stock price seems to be moving in a particular direction and that it might continue that way. At a more complex level, any number of arguments might be advanced to divine a stock’s next movement—maybe ‘interest rate concerns are expected to weigh heavily on housebuilders’ or perhaps ‘continued strong demand from China will maintain positive sentiment towards mining stocks’.

Greater fool

This kind of speculation, where you might willingly pay more for a stock than it’s actually worth, in the hope of passing it on to a ‘greater fool’ at an even higher price, would have struck the Yir Yoront and the Kalkadoon as a very dangerous game to play. It also strikes us as a dangerous game to play. It’s rather like chain letters and ‘ponzi schemes’: some people will make money along the way, but sooner or later most will find that there isn’t in fact a greater fool after all. And because a stock’s intrinsic value will ultimately be realised, the net effect for all investors of buying stocks above their intrinsic value will be a loss, while the net effect for all investors of buying stocks below their intrinsic value will be a gain.

So the aim of value investing is to make sure you buy things for less than they’re worth. That way, you don’t have to rely on an accommodating ‘greater fool’ appearing on cue. Of course, if you’re able to buy something for much less than it’s intrinsically worth, then you might find that you can later sell it to someone else for only a little less than it’s intrinsically worth. And you might then find that you can employ the resulting capital by buying something else again for much less than it’s intrinsically worth.

In this way a skilled value investor can make profits more quickly than by simply waiting for his investments to deliver up their value. But the crucial point is that time is on the value investor’s side: maybe someone will come along next year and make us an offer we can’t refuse for our investments, but maybe they won’t.

http://www.intelligentinvestor.com.au/articles/197/The-essence-of-value-investing-.cfm

Building Wealth Through Stock Market Investments

Sound Investment Strategies Which Will Stand Out All The Time:
 
It is sad to say that the majority of investors like to listen to tips from all sources instead of doing their own homework prior to investing. Even fund managers conveniently buy shares listed in the top actives of the day. Thus fund managers of yesteryear lost heavily when their shares  dropped heavily, and unit trust holders also lost heavily.

Wise investors must follow the following steps before deciding to buy any share in the market if they want to avoid heavy losses when the market collapses. They are as follows:

1) Has the company been making money for the past 3 years out of the lst 5 years at least.

2) Has the company been paying consistent dividends for the last 5 years as you can manufacture profits, but you cannot manufacture cash to pay out the dividends if the accounts are phony.

3) Is the dividend yield based on the share price which you intend to buy has a yield of at least 4%, i.e. if the share you are buying is $1,000, you must get at least $40 in dividend even consider it as a safe investment. If not, don't buy at all. 

If this passes the above 3 guidelines, you are reasonably assured that it is an investment grade share and not a speculative buy. It will automatically eliminate some 80% of all shares listed on stock markets throughout the world.  

You must read the latest Annual Report and analyse the Balance Sheet, Profit & Loss Statement, etc. If you don't even bother to do this, you deserve to lose money as there is no such thing as a free lunch. 
Initially all will make money when the market is going up, and when the market collapses, some 90% of them will be losing money. Remember this, if it is really so easy to make money, nobody will be working today. All of us will just be buying shares to be rich. Alas, this is just a pipe dream.

http://www.sap-basis-abap.com/shares/building-wealth-through-stock-market-investments.htm

3 Different Stock Investing Tips

Depending upon the type of stock, you may need an altogether different investment strategy. We are providing you with three investing tips which will assist you in figuring out as to which one best suit your requirements.

Investing Tip #1: Income
Income stocks are a good investment option for getting regular income from a company. In this investor are paid in the shape of dividends. Though income is taxed yet it provides for a regular income to investors from the stocks.

A company usually divides any excess amount of cash it has as dividend when its operations do no need that money for growth. It can happen because company may have borrowed cash from market or banks or has decided not to expand due to narrow opportunities in the growth.

Investing Tip #2: Growth
These are termed as the hot stocks. They are so called because of their ability to double, triple or even quadruple the investment made by investors in short period of few years. However, to hunt growth stocks is quite a challenge. Like for example, it is not easy to find another Microsoft or Wal-Mart.

But I have some tips for you. You must search and find stocks which have good Earning per Share Growth Rate, have rapidly growing sales and have sufficient operating cash flow and nice profits. When you buy such stocks you become certain that stocks will grow with the time.

Investing Tip #3: Speculative
Investment in speculative stock is based on high risk with high return formula. This is all about getting 100 % returns in shortest time or maybe losing your invested amount altogether! Though returns can usually be good as they normally deal in penny stocks, but all said, risk is there as nobody is sure if speculation is there in stocks. If you are new in stock trade you must resist investing in these stocks.

http://www.makemoneyinstocks.net/3-different-stock-investing-tips/

Speculator vs Investor

Speculator vs Investor

"People who invest make money for themselves; people who speculate make money for their brokers.”

- Jason Zweig

INVESTORS

An investor would carry out background research to:
1. Understand the company’s business.
2. Protect from losses by buying company stock when it’s undervalued.
3. Avoid succumbing to “herd mentality” by buying into hotly-tipped stocks.
The investor would do well, look forward to the assurance of adequate returns and safety principal.

SPECULATORS

Speculators are akin to gambling which carries high risk. And if you consider the matter carefully, would you want to put your hard-earned income to such an uncertain outcome?

Normally, what they buy:
1. A whispered “hot tip” that a particular stock will soon rise in value.
2. Without doing any research on the company, its past performance, or its dividend yield.
3. Media hype on the stock. 

http://special-situation-investing.blogspot.com/

The majority of market participants are speculators not investors.

The Internet and cable networks are full on a daily basis of these types of market calls. In order to be correct, a market prognosticator needs to be correct not only about short and medium-term economic fundamentals but also about market participants’ mass psychology. Can anybody do this on a consistent basis?

The world pays attention because the majority of market participants are speculators not investors. What’s the difference? If you’re a speculator you’re focused on trying to figure out what the price of a given security is going to do in the short term.

If you’re an investor, you’re focused on doing deep fundamental research and finding a situation where the value you receive in making the investment is greater than the cash you invest. Moreover, the payoff more than compensates you for the risk that you are taking. An investor generally has no idea when the market will recognize the under-appreciated value in his investment. He doesn’t overly fret about this because the timing – absent a clear catalyst – is generally not known.

The problem with this thinking is that the evidence shows that the real wealth has been generated by true investors.

http://gregspeicher.com/?p=398

Four ways investors go wrong

If you are one of those people who suffered heavy losses over the past decade, it was most likely due to one of the following four reasons:

1. Bad market timing. I fear that too often investors attempt to time the markets, which is extremely difficult even for professional money managers.

As I have pointed out many times over the years, it is one thing to identify trends but quite another to pinpoint when they will result in major market turns. Sometimes, the time lag can be many months or even years. Being on the wrong side of the market during that period can prove to be very costly.

2. Aggressive asset allocation. Although it has been repeatedly proven to be the most important single factor in investment performance, many investors fail to use the principles of asset allocation in constructing their portfolios. This frequently results in a higher level of risk than is appropriate [because investors tend to] overweight stocks and/or equity mutual funds and underweight fixed-income securities.

I have seen many cases where people in their sixties and seventies had equity weightings of more than 75% and then were stunned when they lost a lot of money in the market bust of 2008 and 2009. For most people, a disciplined asset-allocation approach is the first step to successful investing.

3. Flawed advice. I just read another study purporting to show that Canadians who use financial advisors are better off than those who don't. This one came from the Investment Funds Institute of Canada (IFIC), most of whose products are sold by advisors.

[According to the report,] households with an advisor had 68 per cent of their money in "market-sensitive" securities (equities and mutual funds) and 32% in "conservative" vehicles (term deposits, savings accounts, bonds).

Those who did not use an advisor were split almost equally—51 per cent market-sensitive to 49 per cent conservative. I suspect that a similar U.S. study would produce comparable results.

Financial advisors, like all other professionals, aren't perfect. Sometimes the guidance they offer simply isn’t appropriate, either because it is inconsistent with a person's objectives and risk tolerance or because it is motivated at least in part by commissions. So, it is always a good idea to ask questions and be sure you understand exactly what you're buying before taking the plunge.

4. Pure speculation. Some people like to gamble, pure and simple. I have always said that the place for that is a casino, not the stock market, but there are investors who can't resist. Occasionally, they make a big score. More often, they lose their stake.

Successful long-term investing requires patience and discipline. That may not seem exciting, but it will pay off over time and you won't end up sending me e-mails bemoaning your losses.

Gordon Pape is editor of the Canada Report.

http://www.theglobeandmail.com/globe-investor/investment-ideas/four-ways-investors-go-wrong/article1730868/

Karambunai 39 trading days: Share hike mainly based on speculation

Karambunai 39 trading days (22/9/10 - 16/11/10)

https://spreadsheets.google.com/ccc?key=0AuRRzs61sKqRdE9YMkdDZ0tMOXQ2YmhEZ1NQdXo1VHc&hl=en&authkey=CIGduo4G

From 22/9/2010 to 16/11/2010 (39 trading days)

Total (39 days) volume traded 3,194.73 million shares (157.37% of Shares Outstanding)

Average daily volume traded 81.92 million shares (4.04% of Shares Outstanding)

Total (39 days) amount traded RM 634.18 million 

Average daily amount traded RM 16.26 million

Shares Outstanding 2,030.06 million shares

Closely Held Shares 1,472.40 million shares

At 20 sen per share, Market Capitalization was RM 406.012 million.

Related:

Karambunai shares soar on false report

Karambunai denies plan to build resort casino

Karambunai in the limelight after budget:  Share hike mainly based on speculation

Quarterly Results of Karambunai
Figures are in MR millions

Revenue, Earnings PAT

26.8.2010
Q1 2011 24.031, -14.386

Q4 2010 45.241, -12.973
Q3 2010 38.213, -2.058
Q2 2010 38.148, -3.559
Q1 2010 22.298, -14.609

Q4 2009 26.021, -41.187
Q3 2009 57.736, 1.396
Q2 2009 67.151, 5.818
Q1 2009 44.481, -2.509

Q4 2008 58.578, -14.421
Q3 2008 38.113, -8.288 
Q2 2008 41.414, -3.689
Q1 2008 30.181, -9.041

Q4 2007 39.702, -3.494
Q3 2007 26.799, 66.736
Q2 2007 33,245, -2.797
Q1 2007 29.425, -7.173

Q4 2006 67.082, -3.969
Q3 2006 51.123, 7.924
Q2 2006 44.336, -6.514
Q1 2006 34.423, -9.130

Q4 2005 45.700, -22.864
Q3 2005 34.444, -12.573
Q2 2005 33.138, -9.228
(26.11.2004)