Read? Saving, Lending and Investing (2)
One simple rule to remember. How are we paid?
When we save - we are paid low interest rate.
When we lend (buying bonds or pref shares), we are paid coupon rate (interests)
When we invest in stocks- we are paid dividends and we also speculate for capital gains.
When we invest in property - we are paid rentals and we also speculate for capital gains.
Interests, coupons, dividends, and rentals are basically yield on investment cost; if we don't receive any yield regularly, it is pure speculation When we speculate, it is all about timing to recover capital and gain.
Some people may think that riding it and down is hedging against inflation???
But, when we invest long enough, one day we will recover our capital. Surely that day will come. So we better invest than speculate. Right? LOL
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Hi CW,
ReplyDeleteExcellent.
But sometimes, it is not so easy to draw the line. Is hedging your SGX portfolio in a Bull Market Run with an appropriate hedging instrument, trying to capture as much capital return(ROI) as possible, consider speculation or what?
You tell me.
If you retire your portfolio too early even before the Bull Run reaches it's half way finishing line because you don't know how to hedge, is it then considered as wise investment?
Or both ways are considered as speculations?
Meanwhile, as long as you have a portfolio in the market, you are enjoying some dividends return.
So what's investment? What's speculation? i believe your current intention/action behind your portfolio determine whether you are investing or speculating now. Ha! Ha!
Or can even be both at the same time. Possible or not?
i am confused more than "Confucious" can teach me. (No offence to Confucious).