INVESTING OR SPECULATING
Many unsuspecting would-be investors fall foul of high risk speculative schemes every day. Investing means putting money where there is a high probability of getting a good return and improving on the original amount invested and a low probability of losing your initial invested sum. The word ‘probability’ sums up the amount of risk involved. It is worth noting that risk can almost never be eliminated entirely.
People take risks every day. On the roads for example. When driving on our roads, most drivers abide by speed limits and road rules so that there is a low probability of having an accident or infringement (We'll call these drivers investor drivers). But risk of accident or infringement can't be totally eliminated. There are many people who drive fast and recklessly, more bent on saving time than being sure of arriving in one piece and without a speeding or red light camera infringement. These drivers have a much higher probability of having an accident or an infringement fine of some sort – but of course it is always possible that they will get through a year without having either. We’ll call these drivers the speculator drivers. If the speculator drivers get through the year without an accident or a fine, they are better off than the investor drivers who take more time getting to where they are going. But it’s hard not to think of that famous Clint Eastwood line ‘Do You Feel Lucky, Punk?’ Speculator drivers have a high risk of losing life and money with their driving strategy.
So it is with speculating in investment terms. Speculating means putting money where the likelihood of good returns is not so probable! Many people are tempted by speculative ventures because they usually offer a very good return – a factor that causes many people to overlook the fact that the risk is so high that not only could they end up with no return, they could even lose their original investment.
In general it pays to beware of new ventures, especially where you get a phone call or an email from someone you don’t know pushing a venture that sounds too good to be true, or offering great profits to ‘a few select clients.’ If it sounds too good to be true, it probably is!
Anyone intending to embark on investing money should take advice from a reputable and experienced financial adviser to be sure they are reading the signs correctly and avoid the heartache and financial loss that comes when investments turn out to be at best speculation and at worst, cons!