It is easy to get excited when you read about someone who made millions on a particular “investment”. The latest in the craze are the cryptocurrencies such as Bitcoin. These stories are gaining clicks on social media and financial websites. I often get asked my opinion about these “investments” and my answer is always the same: I have no idea.
This sounds like a funny answer for a financial advisor but there is a very good reason. My expertise is investing and helping clients pursue their financial goals using sound financial strategies. Speculation is not one of them!
Understanding the difference between investing and speculation is important. Speculators look to profit from short term changes in price. Often, they look to anticipate an event or change in the “investments” usage. For example, purchasing natural gas futures in anticipation of a colder than normal winter.
Long term investors, on the other hand, look to participate in the growth of an investment over the longer term. Long term investors use sound investment principles such as diversification and asset allocation to manage risk. By using these principles as part of a comprehensive plan, an investor can be less concerned about short term volatility. Also, a long term investor is not tempted to speculate.
A. Christopher Engle, LUTCF®, CFP®, ChFC®
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
No strategy assures success or protects against loss.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Asset allocation does not ensure a profit or protect against a loss.