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Re: Aren't All Investor are gamblers and speculators???
Old 10-06-2006, 12:51 PM   #21
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Re: Aren't All Investor are gamblers and speculators???

I'm no gambler, but the blackjack tables I played had multiple decks, and reshuffled often; maybe Spock or Data could count those cards, but after a few "free" casino drinks, I sure couldn't...
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Re: Aren't All Investor are gamblers and speculators???
Old 10-06-2006, 12:53 PM   #22
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Re: Aren't All Investor are gamblers and speculators???

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Originally Posted by HFWR
I'm no gambler, but the blackjack tables I played had multiple decks, and reshuffled often; maybe Spock or Data could count those cards, but after a few "free" casino drinks, I sure couldn't...
Yeah, no kidding. The further I got into the card-counting systems the more I began to appreciate the sheer simplicity of running nuclear reactors.

Basic strategy with progressive betting. Ironically also recommended by a nuke.
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Re: Aren't All Investor are gamblers and speculators???
Old 10-06-2006, 04:28 PM   #23
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Re: Aren't All Investor are gamblers and speculators???

1) Gambling - gambling is a zero sum game governed largely (blackjack) or entirely (roulette) by chance.

2) Investing - investors are distinguished from gamblers in that investing is not a zero sum game. Gamblers seek to divvy up a fixed pie, appropriating a larger share for themselves, whereas investors look to make money by building something of value and thereby increase the size of the pie.

3) Speculating - speculating is an amorphous term. It could be used to describe short-term trades in a manner similar to gambling or it could be used to describe a high risk investment.


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Re: Aren't All Investor are gamblers and speculators???
Old 10-06-2006, 05:50 PM   #24
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Re: Aren't All Investor are gamblers and speculators???

Gambling - odd of winning is low, but the potential payoff is high
Investing - the probability of getting a postive return over time is good
speculating - short-term trading, odd is 50/50
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Re: Aren't All Investor are gamblers and speculators???
Old 10-07-2006, 12:53 PM   #25
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Re: Aren't All Investor are gamblers and speculators???

Three ways to make money:
1) trade time for money
2) trade money for money
3) trade other people's time and money for money.

Working, consulting and personal portfolio management fall into category 1.

Bonds, GICs and bank interest are in category 2.

Stocks, mutual funds, index funds and owning a business are in category 3.

Category 2 has historically returned the lowest returns. Does this make them lowest risk? I don't think so. Yes your principal can be protected if you always hold until end of term. But your buying power has eroded and you have made less than both other categories most of the time.

There has been substantial debate about Category 1. I believe that those who risk their egos the most (such as in sales or as CEO) get the best returns for their time invested. They risk personal humiliation and public failure more than most employees. This is the single highest leverage that most people enjoy during their first 10 years of career.

Category 3 is where most people discuss risk. I have seen discussions about tolerance for volatility as the most productive as the determining factor for what kind of returns one can hope to make. Just look at the 12 month stock charts for individual companies to appreciate volatility.

My father, MIL and brother have only invested in Category 2 and this has cost them dearly both in their working and retirement years. Their only source of speculative returns has been their property purchases.
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Re: Aren't All Investor are gamblers and speculators???
Old 10-07-2006, 05:35 PM   #26
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Re: Aren't All Investor are gamblers and speculators???

Quote:
1) trade time for money
Spending so much time or effort to make money will leave you no (or enough) time to enjoy it.
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Re: Aren't All Investor are gamblers and speculators???
Old 10-07-2006, 08:16 PM   #27
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Re: Aren't All Investor are gamblers and speculators???

Quote:
Originally Posted by kcowan
Three ways to make money:
1) trade time for money
2) trade money for money
3) trade other people's time and money for money.

Working, consulting and personal portfolio management fall into category 1.

Bonds, GICs and bank interest are in category 2.

Stocks, mutual funds, index funds and owning a business are in category 3.

Category 2 has historically returned the lowest returns. Does this make them lowest risk? I don't think so. Yes your principal can be protected if you always hold until end of term. But your buying power has eroded and you have made less than both other categories most of the time.

There has been substantial debate about Category 1. I believe that those who risk their egos the most (such as in sales or as CEO) get the best returns for their time invested. They risk personal humiliation and public failure more than most employees. This is the single highest leverage that most people enjoy during their first 10 years of career.

Category 3 is where most people discuss risk. I have seen discussions about tolerance for volatility as the most productive as the determining factor for what kind of returns one can hope to make. Just look at the 12 month stock charts for individual companies to appreciate volatility.

My father, MIL and brother have only invested in Category 2 and this has cost them dearly both in their working and retirement years. Their only source of speculative returns has been their property purchases.

excellent explaination, hope u don't mind if i "borrow" your way of thinking about making money. very intersest, seems almost everyone have no choice but to "trade time for money" and no wonder why there areN'T so many people are rich. mostly just getting by.

how do you earn your money, kcowan. if u don't mind i am asking.

enuff

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Re: Aren't All Investor are gamblers and speculators???
Old 10-08-2006, 12:48 PM   #28
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Re: Aren't All Investor are gamblers and speculators???

Quote:
Originally Posted by Enuff2Eat
excellent explaination, hope u don't mind if i "borrow" your way of thinking about making money. very intersest, seems almost everyone have no choice but to "trade time for money" and no wonder why there areN'T so many people are rich. mostly just getting by.

how do you earn your money, kcowan. if u don't mind i am asking.
I started out as a process engineer for a high tech firm automating an oil refinery. Then I switched to sales and had five excellent years, often doubling my target earnings. The beauty of this is that the extra gets invested because it is a windfall.

These years were tough on the family because the work was consuming to get those kind of results. We would play hard though because we had the money.

Then in sales management for 5 years, I learned about leverage. Then I embarked on 8 years getting the rounded experience needed for my second career. Finally ran an international software center for 6 years. Most of this time was spent using a combination of Cat 1 & 3.

Then ten years as managment consultant/entrepreneur until ER, using all 3 categories.

Secret to ER? Saving extra bonuses and investing most of them wisely. Relatively frugal living. Good leverage on real estate.

Now I spend time managing portfolios for wife and I plus MIL. (Cat 1 - portfolio management, Cat 2 - portfolio itself, Cat 3 - still hold stock in 3 private companies where I am on the Board.) Not counting any returns from Cat 3 holdings. If they materialize, we might by a villa in Tuscany...

Been a DIYer all my life.
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Re: Aren't All Investor are gamblers and speculators???
Old 10-08-2006, 01:08 PM   #29
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Re: Aren't All Investor are gamblers and speculators???

Getting into sales is one way to acheive FI early. The average salary of a sales rep in our industry (medical implantable devices) is about $250K - 5% of which makes over a million a year. The job does require long hours, including late evenings and weekends during which implants may take place.
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