Words of Wisdom
"The
individual investor should act consistently as an investor and not as a
speculator"
Over the course of the past several decades, the term "investor" has evolved into including anyone who owns a share of stock. When a person purchases stock, they are doing it as one of two people: either an investor or a speculator.
What's the difference? An investor is
someone who carefully analyses a company, decides exactly what it is worth, and
will not buy the stock unless it is trading at a substantial discount to its
intrinsic value. Investors are able to distinguish between investment fads and
investment value.
Investors determine a share's worth, decide
if it is under or overvalued, and purchase if it is undervalued. They make
their investment decisions based on factual data and do not allow their
emotions to get involved. A speculator is a person who buys a stock for any
other reason. Often, speculators purchase shares in a company because they are
"in play," which is another way of saying a stock is experiencing
higher-than-normal volume and its shares have the appearance of being
accumulated or sold by institutions. They buy stock not on the basis of careful
analysis, but on the chance that it might rise from any cause other than a
recognition of its underlying fundamentals.