Is speculation considered another way of investing? Is speculation recommended?
We dare to compare speculation to betting in a horse race on the winning horse (buy) or on the loser horse (sell).
Anyone betting for a particular horse will follow certain indications (former race results or even some friend’s opinion) in a similar way to that traders get certain indications by analyzing charts that give buy and sell signals. Speculators don’t care much about the business behind the company or its financial data.
Investors have a completely different approach. They are interested in the company’s fundamental data, invoicing, results, cash flow, growth and/or long-term potential. Investors use PER or PEG as measurement tools that show how expensive a company is. Probably investors will go on analyzing the company based on an evaluation model to determine the company’s intrinsic value and therefore, if the current price of that company is justified or not compared to this value.
Inbestme doesn’t believe at all in speculation and we clearly define ourselves as investors.
Even though we are aware that graphs provide useful information about what has happened or is happening, we also think they tell us nothing about what will happen in the future. A large number of studies confirm that speculation based on trading signals hardly contributes to long-term real value for the investor after deducting transactional costs, which multiplies by speculative activity itself (buying with buy signals and selling with sell signals).
We believe the best way to ensure strong returns for our portfolios, is by acting as long-term entrepreneurs and creating a solid portfolio pyramid.
We search for value in a board sense, so when we find it in a company we invest in this company and “wait” to see how our investments grow.
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