Speculating v Investing

There is a huge difference between speculating and investing.

Speculating tends to involve holding a short term position in a risky investment in the hope of a big pay-off. This can include investing in assets such as crypto-currency, short-selling stocks or buying into the next hot tip.

Investing, on the other hand, is a long-term endeavour designed to increase wealth over time. It involves putting together a coherent investment strategy taking into account asset allocation, risk and your long-term goals.

Managing Your Emotions

Despite what most in the investment industry will want you to believe, investing over the long term is less about making tactical decisions but more about managing emotions.

As markets move, so our emotions can change as the following image shows.

Building Blocks for Long Term Wealth

When it comes to investing, there are a number of factors that can help grow your wealth over the long term including:

Don’t try and time the markets – once invested, stay invested.
Diversify – across asset classes and regions.
Control costs – ensure that charges aren’t eating into investment performance.
Take advantage of tax allowances and tax reliefs – tax can erode investment performance.
Accept a degree of risk – all investments come with an element of risk.
Where possible, invest regularly and increase contributions over time.

Successful investing is often not particularly exciting and most investors are best served with a dull and sensible investment strategy that they are going to stick to over the long term.

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