Must we speculate to accumulate?

Stock-market-timing

The saying goes that you must speculate to accumulate. This proverb says little to help people in search of a sensible long-term investment strategy, but it does suggest something important about one of the basic principles of investing; the relationship between risk and reward.

To many people, speculation is on the wild side of the risk spectrum; where the long-term outcome is highly uncertain. The truth is, all investments carry some degree of risk, but with the right strategy in place, it is possible to increase the reliability of an investment outcome. Investors with the right sort of strategy will consider the trade-off between risk and reward, the implications of taxation and of costs and the need for future liquidity.

Investing is not simply a case of sizing up an opportunity and going for it. Many people will have considered the issue of Royal Mail shares, for example, as an investment opportunity. But given the uncertainty that surrounds newly issued shares (or indeed the long-term performance of any individual share) you could argue that Royal Mail is more speculation than investment. Royal Mail might do something to help you achieve your complex long-term financial goals, but it is speculative at best to rely on it or other single share holdings alone.

With the right plan in place and the right discipline to follow it you can accumulate without having to speculate.

Duncan R Glassey
Senior Partner – Wealthflow LLP

duncan.glassey@wealthflow.com

This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated. Errors and omissions excepted.