Master The Market: Investment Vs. Speculation With Bill Grand'S Timeless Strategy AudioChapter from The Timeless Investment Strategy AudioBook by Bill Grand
The Timeless Investment Strategy: Everything You Need To Start Making Money In The Stock Market Today (Investpreneurs Book 1)
By: Bill Grand
00:00:00 The Timeless Investment Strategy
00:07:37 Investment vs. Speculation
00:31:08 Introducing Mr. Market and the Market Psychology
Hear it Here - https://bit.ly/investmentgrand
https://www.amazon.com/dp/B08NPC1WV8
Why do over 90% of investors lose money in the stock market? How do the top 1% get ahead?
Imagine what life would be like if you could start off each day without needing to report to a boss. You enjoy a nice breakfast, have a peaceful conversation with your loved ones and then do what you love. What if this is no longer a dream but something you can take one step closer today?
All of this is possible with the compounding power of investing. Measure what matters. Investing isn't about doing a lot. The inverse is true. Most investors lose money in the stock market because they do too much. 90% of investors "thinks" that they are investors but all they are really doing is trading. When black swan events occur, holding a stock for a year just seems impossible to these losing investors.
Become An Intelligent Investor, Even If You Are A Complete Beginner Today.
In this book, you will discover:
The Timeless Investment Strategy and why Warren Buffett recommends this strategy.
7 financial philosophies that billionaire investors live by and how you can tap onto this.
The three types of income you need to know (and why each is deadly important).
The power of compounding and a completely new way of looking at investing.
A complete 8 steps guide to help you crystallize this strategy into reality.
Why anyone can startup an investment habit with $100 or less.
And everything you need to become a profitable investor... starting today.
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Transcript
The Timeless Investment Strategy
Speaker:Everything you need to start making money in the stock market today.
Speaker:Investpreneurs Book 1.
Speaker:Written by Bill Grand. Narrated by Russell Newton.
Speaker:Meet Jim.
Speaker:He’s 30 years old, and has $100,000 worth of student loan debt.
Speaker:He’s just now managed to land a job that he’d like to make a career of,
Speaker:but he’s spent most of his 20s scraping by on minimum wage and unpaid internships.
Speaker:He’s a hard worker, but wage stagnation has prevented him
Speaker:from getting any kind of meaningful raise.
Speaker:And the cost of living in his home city is so high that the raises he’s
Speaker:gotten haven’t made much of a difference when it comes to planning his finances.
Speaker:Now he finally has the funds to start thinking seriously about his retirement,
Speaker:but he still doesn’t have much to put away every month.
Speaker:Does this sound familiar?
Speaker:If you have anything in common with Jim, you’re hardly alone.
Speaker:For many people, the stressors of steep bills, scant job prospects,
Speaker:and an unstable economy make saving for retirement seem like more of a dream than a necessity.
Speaker:Most people don’t even start thinking about retirement until well into their 30s,
Speaker:and even then, they typically think about retirement in terms of “saving”
Speaker:or “putting away” money rather than investing it (Tweddale, 2019).
Speaker:Let’s return to Jim.
Speaker:Would it surprise you to learn that, by the time he turns 65,
Speaker:he will have $750,000 in his retirement account?
Speaker:He could do this by finding himself a really good job or landing himself a big promotion.
Speaker:He could win the lottery or inherit from a wealthy relative (Tweddale, 2019).
Speaker:These are all ways to accrue a great deal of wealth,
Speaker:but Jim’s strategy is easier and more reliable.
Speaker:All he’s going to do is put $1,000 into
Speaker:an investment account every month from age 30 to age 40.
Speaker:Once there, it will continue to accrue, at a rate of seven percent, until he’s 65 years old.
Speaker:Jim is going to save $120,000 over ten years,
Speaker:but that’s going to turn into $750,000 through the power of compound interest (Staff, 2019).
Speaker:You, too, could be like Jim.
Speaker:Better still, you could be like Joe, who started saving ten years earlier than Jim, at age 20.
Speaker:By the time Joe is 40 years old he, too, will have saved $120,000.
Speaker:But because he started saving earlier, he only had to put away $500 a month instead of $1,000.
Speaker:And because he chose to invest that money,
Speaker:he’s going to have $1,500,000 in his retirement account by the time he’s 65.
Speaker:The secret to financial security is not money, it’s time.
Speaker:With this book in hand, you’ll be able to use all the time you have to convert
Speaker:years of savings into hundreds of thousands of dollars in returns.
Speaker:Investment might seem like a game or a gamble,
Speaker:but it only becomes that way for people who start too late.
Speaker:The earlier you begin investing your money, the larger your accounts become.
Speaker:Whether you are 19 or 45, the time to start investing your money is now.
Speaker:Not tomorrow, and definitely not ten years from now.
Speaker:Every day that goes by is a day that you are losing thousands of dollars in potential savings.
Speaker:Too many people find themselves struggling for financial security throughout their lives
Speaker:because they don’t start thinking about saving their money until it’s too late.
Speaker:Many people never invest at all, mistakenly believing that investment is only for
Speaker:people who have already achieved a great deal of wealth (Staff, 2019).
Speaker:This book is here to make sure that you aren’t one of those people.
Speaker:Consider this a step-by-step guide on how to invest your money in ways that are smart,
Speaker:secure, and guaranteed to earn you high returns.
Speaker:You may believe that you don’t make enough money to start investing.
Speaker:You may believe that you’re too young to start worrying about your financial future.
Speaker:But the truth is that investment is not only for the rich.
Speaker:This book will provide you with real-world examples and practical guidance to help
Speaker:you begin your investment journey, no matter what your current financial situation may be.
Speaker:Whether you have student debt, a high mortgage, or even low credit,
Speaker:this book will help you to create an investment strategy that works for you.
Speaker:This book is organized in a chronological way,
Speaker:designed to walk you through the investment process step-by-step.
Speaker:From playing the stock market to setting up an investment account,
Speaker:each chapter will introduce a new phase in your investment strategy.
Speaker:Rather than trying to learn everything all at once, you can simply follow the
Speaker:book chapter by chapter, applying the concepts to your own finances.
Speaker:Whether you’re a complete beginner or have some experience with investments, the investment
Speaker:strategy outlined in this book has something you can use to improve your financial security.
Speaker:The strategies provided in this book are based on real-world numbers and marketplace research.
Speaker:New concepts and terminology are explained in clear, straightforward language designed to make
Speaker:you comfortable with the concepts and confident as you begin applying them to your own life.
Speaker:This book, above all, is a journey.
Speaker:The theories and concepts introduced here will
Speaker:always be grounded in practical ways that you can apply them to your own finances.
Speaker:The goal of this book is not simply to teach
Speaker:you the basics of stock market trading or investment strategy.
Speaker:This is a fully formed investment plan; a financial Global Positioning System that
Speaker:will guide you through the system toward the highest possible returns.
Speaker:You don’t have to take a course in economics or business to learn
Speaker:the ins-and-outs of smart investing, and you certainly don’t have to have
Speaker:sizable savings already under your belt before you start investing your money.
Speaker:The last thing you might want to do in your 20s is start planning for retirement.
Speaker:You’re just beginning your financial life.
Speaker:Between rent, loan payments, and all the rest of life’s expenses,
Speaker:it can feel like you barely have anything left to invest.
Speaker:You might feel just like Jim or Joe,
Speaker:and you may be wondering how in the world Jim ever managed to put away $1,000 a month.
Speaker:But remember - it’s not about how much you invest,
Speaker:it’s about how long your money is able to accrue interest.
Speaker:Have you ever heard the old saying, time is money?
Speaker:It’s more than just a metaphor.
Speaker:The earlier you begin investing,
Speaker:the less you need to invest every month in order to start making money.
Speaker:You don’t have time to waste trying to teach yourself about dividends or 401(k) accounts,
Speaker:and with this book in hand, you don’t have to.
Speaker:Follow the steps in this guide, one by one, and by this time tomorrow,
Speaker:you’ll be well on your way to becoming a smart investor with a solid financial future.
Speaker:Free Bonus
Speaker:You need to stop what you’re reading right now.
Speaker:Hey, this sounds counterintuitive isn’t it?
Speaker:Well, the reason is simple.
Speaker:I have a free bonus set up for you.
Speaker:The problem is this - we forget 90% of everything that we read after 7 days.
Speaker:Crazy fact, right?
Speaker:Here’s the solution - I’ve created a printable,
Speaker:1-page pdf summary for you… in regards to this book.
Speaker:All you have to do now is visit billgrand.com/hello.
Speaker:Once you visit billgrand.com/hello, it will be intuitive.
Speaker:Enjoy & thank you!
Speaker:Chapter 1 - Investment vs. Speculation
Speaker:The Dow Jones average tends to rise over time.
Speaker:The world of the stock market is approached through two main
Speaker:schools of thought - investment and speculation.
Speaker:Speculation is what most people think of when they think of “playing” the stock market.
Speaker:Speculators try to choose which stocks to buy and sell based on
Speaker:what they think the marketplace will look like in the future.
Speaker:But in the words of Warren Buffett,
Speaker:the market forecaster’s only job is to make a fortune-teller look good.
Speaker:No one can predict the future,
Speaker:no matter how consistent the trends may be or how reliable the data looks.
Speaker:Speculation is essentially gambling, taking chances on what you think might happen,
Speaker:rather than looking at the reality of the marketplace in front of you.
Speaker:This book is not about speculation.
Speaker:It’s about investment.
Speaker:As an investor, you never “play” the market, you study it.
Speaker:Investors make smart decisions that are grounded in their individual financial realities and the
Speaker:landscape of the stock market as it is, not as they think it might be.
Speaker:Investors don’t gamble, they trade.
Speaker:All investments are based firmly in facts.
Speaker:This book will never encourage you to gamble with your money,
Speaker:nor will it teach you how to “predict” future marketplace trends (Proctor, 2020).
Speaker:As an investor, you are not going to get sidetracked by “get-rich-quick” schemes.
Speaker:Investors get rich slowly, which is why the more time you have to accrue your wealth,
Speaker:the more wealth you’ll have when it’s time to cash out.
Speaker:Investment requires patience, especially in the beginning.
Speaker:But the advantage you have as an investor over a speculator is security.
Speaker:While speculators lose their money as quickly as they earn it,
Speaker:the accounts of investors only get bigger.
Speaker:Investing guarantees you peace of mind.
Speaker:You can sleep soundly at night knowing that your money is safe and your future is assured.
Speaker:To quote Warren Buffett again, it’s foolish to risk what you have
Speaker:and what you need for what you don’t have and don’t need (Proctor, 2020).
Speaker:The backbone of smart, or “defensive,” investing is a concept called dollar cost averaging.
Speaker:This is the process of investing the same amount
Speaker:of money at regular intervals of time into the same asset.
Speaker:The goal of this process is to protect your
Speaker:assets against the inevitable volatility of the marketplace.
Speaker:It effectively neutralizes your risk by spreading it out.
Speaker:Market values are constantly rising and falling,
Speaker:but over time, the trend is always an upward curve.
Speaker:Making small payments over a long period of time stops you from losing money when
Speaker:market values dip, while reaping the highest possible returns when the market values rise.
Speaker:In recent times, this strategy is more important than ever.
Speaker:In today’s marketplace, it’s not uncommon for individual stocks
Speaker:to jump or plummet by as much as 10% in a single trading session.
Speaker:When the market is this volatile, even the most cautious and defensive investor can be
Speaker:tempted to make knee-jerk decisions based on momentary realities that can ultimately
Speaker:cost them money in the long-run.
Speaker:The dollar cost averaging method helps to prevent you from making
Speaker:those knee-jerk decisions, helping you to consistently maintain your
Speaker:assets even in the face of the wildest marketplace swings (Proctor, 2020).
Speaker:The dollar cost averaging method asks you to treat individual assets as long-term investments.
Speaker:Over a certain period of time, you regularly make investments of the same dollar amount,
Speaker:with the expectation that the asset will slowly but steadily accrue interest over time.
Speaker:The investment schedule is completely up to you.
Speaker:Investors can choose to buy shares of that asset once per week, per month, or even per quarter,
Speaker:depending on what is comfortable for them in their current financial situation (Proctor, 2020).
Speaker:The most important aspect of the dollar cost averaging method is its consistency.
Speaker:Regardless of the asset’s price, you invest the exact same dollar amount every single time.
Speaker:It’s this rigid formality that protects you from marketplace swings.
Speaker:When the market is down, you can buy more shares per dollar invested.
Speaker:When the market eventually goes back up, your dollars will buy you fewer shares, but you’ll
Speaker:also earn that much more money on the shares that you purchased when the market was down.
Speaker:Let’s look at an example to illustrate how this method works.
Speaker:Imagine that you have $300 to invest every month.
Speaker:You decide to buy shares from an S&P 500 index fund on a regular monthly schedule.
Speaker:You’ve chosen this particular index fund because it’s currently trading at $30 per share.
Speaker:In the first month, your $300 gets you started with ten shares.
Speaker:If the fund increases in price to $50 the following month,
Speaker:then your investment will only buy you six more shares.
Speaker:But if the fund decreases in price to $20 per share, then you’ll be able to purchase 15 shares.
Speaker:Rigidly committing to investing your $300 every month, regardless
Speaker:of marketplace fluctuations, will greatly reduce the risk
Speaker:of your investment because the risk is spread out over several months.
Speaker:To use another example, imagine that you have $1,000 to invest
Speaker:in a stock that’s currently trading for $100 per share.
Speaker:If you were to invest that money all at once, you would be able to purchase 10 shares.
Speaker:But instead, imagine that you choose to invest just $250 per month over a period of four months.
Speaker:By the end of the fourth month, you will still have invested $1,000.
Speaker:In the first month, $250 will buy you 2.5 shares.
Speaker:But imagine that, in the second month, the price per share goes down to $90.
Speaker:In the second month, $250 will buy you 2.78 shares.
Speaker:In the third month, the price goes down to $85, which gets you to 2.94 shares.
Speaker:And finally, the price goes down to $80 in the fourth month,
Speaker:which buys you 3.12 shares (Proctor, 2020).
Speaker:At the end of four months, you will have 11.34 shares instead of
Speaker:the 10 that you would have if you invested your $1,000 all at once.
Speaker:An extra 1.34 shares may not seem like much, but 1.34 shares worth of extra profit for every
Speaker:dollar of stock price growth in the future.
Speaker:And since you’ll continue to buy shares even when the market is down,
Speaker:your account never decreases in value (Proctor, 2020).
Speaker:In addition to risk-reduction, the second biggest advantage of dollar
Speaker:cost averaging is that it removes emotion from the investment process.
Speaker:In personal relationships, remaining connected to your feelings is healthy and beneficial.
Speaker:But in the world of investment, emotional decisions can cost you a great deal of money.
Speaker:In the face of huge marketplace swings, it can be extremely tempting to try to “time” the market.
Speaker:It will be tempting to increase your investments when prices are cheap,
Speaker:hoping to make a huge profit when the market swings up again.
Speaker:But this kind of erratic behavior increases your risk.
Speaker:This is how even smart investors end up losing money.
Speaker:If you rigidly make the exact payments every single time,
Speaker:you won’t be allowing your own fears and excitements to control your financial future.
Speaker:It can’t be stated enough - the stock market is impossible to predict.
Speaker:Just because a stock or fund dropped by 30% this week does not mean that it’s
Speaker:going to rebound by 20% next week, or even next month, for that matter.
Speaker:Constantly hopping in and out of stock positions is guesswork.
Speaker:Predicting marketplace trends is extraordinarily difficult even
Speaker:for investment professionals who spend 40+ hours a week studying the market.
Speaker:You almost certainly have better things to do with your time and your money.
Speaker:If you make yourself an investment schedule and stick to it,
Speaker:then you’ll never have to worry about marketplace trends again.
Speaker:While other investors are up all night watching the market rise and fall,
Speaker:you’ll be sleeping soundly with the knowledge that your assets are secure.
Speaker:Dollar cost averaging stops you from becoming emotionally invested in marketplace fluctuations.
Speaker:You won’t feel the need to panic when the market falls,
Speaker:nor will you be tempted to risk your hard-earned money on high-risk investments.
Speaker:Dollar cost averaging keeps you secure,
Speaker:but it also keeps you smart when deciding which asset to purchase in the first place.
Speaker:Unfortunately, no investment method is fool-proof.
Speaker:Dollar cost averaging does have a few drawbacks.
Speaker:First and foremost, the marketplace tends to go up more than it goes down.
Speaker:This means that it can take a while before you start making any real profits on your investments.
Speaker:To illustrate how this works, let’s return to our previous example.
Speaker:You have $1,000 to invest, and you’ve chosen to invest in an
Speaker:asset that’s currently trading at $100 per share.
Speaker:Rather than investing your $1,000 all at once,
Speaker:you decide to spread it out over four months at $250 per month.
Speaker:In the first month, your $250 earns you 2.5 shares.
Speaker:But imagine that in month two the price per share increases to $110.
Speaker:Now your $250 will only buy you 2.27 shares.
Speaker:In the third month, the price increases to $115, which only earns you 2.17 shares.
Speaker:And in the fourth month, the price climbs to $120, which only gets you 2.08 shares (Proctor, 2020).
Speaker:At the end of the four months, you’ll only end up with 9.04 shares,
Speaker:rather than the 10 shares you would have earned if you had invested your $1,000 all at once.
Speaker:So while dollar cost averaging will protect you when the market is low,
Speaker:it can hold you back when the market is high.
Speaker:And long-term S&P 500 data does indicate that high,
Speaker:or “bull” markets, tend to last longer than low, or “bear,” markets.
Speaker:Investing your money all at once is called “lump-sum” investing,
Speaker:and many investors choose this method over dollar cost averaging because they
Speaker:don’t want to wait for the market to go through a cycle of falling and rising
Speaker:before they start making money on their investments (Proctor, 2020).
Speaker:At the end of the day, the investment method that you choose is up to you.
Speaker:But if you’re like most 20- or 30-somethings,
Speaker:then you probably don’t have a big chunk of money to invest in a lump-sum scheme.
Speaker:The dollar cost averaging method helps you to budget a set amount
Speaker:of money every month that you’ll put toward investment assets.
Speaker:It’s a slow-and-steady method, but the more time you have,
Speaker:the more money you will make in the long-run.
Speaker:In real life, your investment schedule won’t be a mere four months.
Speaker:You’ll be choosing an investment schedule that you plan to stick with for the next ten years.
Speaker:No matter how long it takes your asset to start earning you money,
Speaker:when you do start earning, your profits will climb exponentially.
Speaker:You have time on your side, and that means you don’t have to start making a profit tomorrow.
Speaker:You’re playing the long-game, and that means you can afford to wait for your wealth to accumulate.
Speaker:Speculation and the Flawed Theory Behind It
Speaker:Research the company or companies you want to invest in.
Speaker:In many ways, speculation is the opposite of investing.
Speaker:Speculators study the market as it rises and falls, hoping to cash in on sudden swings.
Speaker:Speculators trade assets, rapidly buying and
Speaker:selling assets in an attempt to profit from potential upswings.
Speaker:If you have a great deal of money to play with,
Speaker:then there’s nothing inherently wrong with a speculative approach to the stock market.
Speaker:But most of us don’t have hundreds of thousands of dollars to lose on a
Speaker:high-risk investment, especially when we’re young.
Speaker:Speculation is like a hobby or even a career, something that people devote
Speaker:themselves to full-time in an attempt to make a huge profit in one lucky move.
Speaker:While it’s true that you might strike it rich,
Speaker:you could just as easily lose your entire life savings.
Speaker:Investment is a long-term plan, done with the intention of increasing your financial security.
Speaker:Speculation, on the other hand, might make you more money, but it always decreases your security,
Speaker:because you never know if your investments will bring you wealth or ruin (Yeo, 2017).
Speaker:Investors make their decisions based on the asset itself.
Speaker:They buy now with the intention of making that money back, with interest, in the future.
Speaker:And investment doesn’t only apply to stocks.
Speaker:Whether you’re choosing to sink your money into apartments, farms, commodities, or the stock
Speaker:market, an investor always looks at the asset as a money-maker in the distant future (Yeo, 2017).
Speaker:For this reason, the initial price or value of the asset is not important to an investor.
Speaker:An investor’s primary concern is making money in the future.
Speaker:When choosing an asset, investors aren’t thinking about what will make them money the quickest,
Speaker:they’re thinking about what will make them the most money in the long-run.
Speaker:Investors are always thinking in the long-term,
Speaker:and therefore understand the difference between “price” and “value."
Speaker:Price is what you pay for something, but value is what you get from it.
Speaker:In the world of investing, the ultimate
Speaker:value should always be more than the initial payment price.
Speaker:This is why dollar cost averaging is such a popular method for young investors.
Speaker:They are not concerned about what the market is going to look like tomorrow or next week.
Speaker:They understand that, over the course of years, any business is going to continue to make money.
Speaker:The overall trend will always be upward, and that means that,
Speaker:as long as the investor sticks to their chosen investment schedule,
Speaker:they will end up earning far more than they paid for their investments.
Speaker:Speculators, on the other hand,
Speaker:are more concerned with the price of the asset than with the asset itself.
Speaker:Speculators look for the cheapest assets that
Speaker:are predicted to increase in value over the next quarter.
Speaker:They buy up as much as they can while the asset is cheap,
Speaker:hoping to turn over a huge profit within a very short time.
Speaker:To many, speculation sounds like gambling,
Speaker:especially if you accept the reality that marketplace trends are unpredictable.
Speaker:But the difference between speculating and gambling is that gamblers don’t
Speaker:need to be part of the system into which they’re sinking their money.
Speaker:For example, imagine you cast a bet on the outcome of a football game.
Speaker:The football game’s operation and ultimate outcome exist independently of your bet.
Speaker:If you bet nothing at all, the game will go on with the same outcome.
Speaker:If you bet thousands of dollars or just a few, it doesn’t matter.
Speaker:Gambling is 100% based on luck, and the gambler
Speaker:always exists independently of the system off which it’s making money (Yeo, 2017).
Speaker:Speculators, on the other hand, are still part of the system.
Speaker:They are active “investors” in the economic system,
Speaker:and the amount of money that they choose to invest can have
Speaker:an impact on the failure or success of the asset they’re trying to profit from.
Speaker:Speculators don’t blindly place bets and watch the market change from afar.
Speaker:They buy up cheap assets that they have reason to believe will quickly increase
Speaker:in value and make them a handsome profit in a short amount of time (Yeo, 2017).
Speaker:The major flaw in the theory of speculation is
Speaker:assuming that marketplace predictions are possible.
Speaker:The marketplace doesn’t exist in a vacuum,
Speaker:and trends don’t rise and fall based on a closed, internal system.
Speaker:Marketplace trends are affected by political events, social upheaval, and even public opinion.
Speaker:A speculator in December 2019 would have no idea that the coronavirus pandemic
Speaker:would take the world economy by storm just one month later.
Speaker:When CEOs fall out of popular favor, shares in their companies can decrease.
Speaker:And individual businesses are constantly working to turn a profit.
Speaker:A business that seems like it’s struggling now may turn itself around in five or ten years.
Speaker:A speculator will miss out on those earnings, but an investor will weather the storm.
Speaker:And on the flip side, a speculator may invest a great deal of money in
Speaker:anticipation of an upcoming advertising campaign or political election, only to
Speaker:find that the public response to those events was very different from what was expected.
Speaker:Speculators don’t look at the asset itself, they just look at the asset’s price action.
Speaker:But looking at the marketplace numbers as simple numbers is misleading.
Speaker:An investor understands that share prices and
Speaker:marketplace trends are reflections of events happening in real life.
Speaker:Those numbers are based on business deals, international relations,
Speaker:major political events, and even public opinion of certain assets.
Speaker:Investors understand that prices are constantly changing,
Speaker:and so they don’t invest for price, they invest for value.
Speaker:Investors choose assets that they can reasonably
Speaker:expect will still be making money in ten or even twenty years from now.
Speaker:Speculators believe that tomorrow is easier to predict than ten years into the future,
Speaker:but in the world of finances, the truth is quite the opposite.
Speaker:If you’re looking for a secure investment strategy,
Speaker:you’re not counting on your investments to pay your bills.
Speaker:The money that you’re putting in now you aren’t expecting to get back for a long time.
Speaker:This is the wealth that you will retire on, the wealth that will help you to live
Speaker:in security and comfort after a lifetime of working and budgeting like everyone else.
Speaker:Dollar cost averaging helps to make investment possible for people of all
Speaker:incomes because it allows the individual to invest only what they have to spare.
Speaker:If you choose to invest $5 a week in your chosen asset because that’s all
Speaker:you have after you’ve paid your bills, that’s ok.
Speaker:If you have $500 a month to invest, that’s ok too.
Speaker:No matter how much you put in, you will get back more.
Speaker:But in order for you to turn a profit, you have to wait.
Speaker:Like tending a vegetable garden,
Speaker:investors maintain their assets and watch their profits grow,
Speaker:understanding that they won’t be able to reap the fruits of their labor for a long time (Yeo, 2017).
Speaker:Speculators, on the other hand, often don’t have an income.
Speaker:They don’t have another way to pay their bills or maintain their lives.
Speaker:Speculation is a career unto itself, because in order to have
Speaker:any hope of turning a profit they have to study the marketplace in real-time.
Speaker:They have to know as much as they can in order to make accurate predictions,
Speaker:and even then, they often find themselves losing just as much as they gain.
Speaker:Speculation isn’t a long-term plan for security,
Speaker:it’s an attempt to make a lot of money in a short amount of time.
Speaker:How long that money lasts depends on the speculator,
Speaker:the asset, and the whims of a highly volatile marketplace (Yeo, 2017).
Speaker:For this reason, speculators take on a lot more risk than investors do.
Speaker:There is no such thing as a zero-risk
Speaker:investment, and even the most defensive and careful investors sometimes lose money.
Speaker:But speculators understand that there’s a chance of losing the entire principal
Speaker:investment amount, which is nearly impossible for a defensive investor.
Speaker:You may lose something on an investment, but you’ll rarely lose everything.
Speaker:Speculators, on the other hand, lose everything - all the time.
Speaker:While you’ll find speculators and investors in multiple different economic arenas,
Speaker:there are certain territories that are more likely
Speaker:to attract investors than speculators, and vice versa.
Speaker:Investors typically stick to the stock market, bonds,
Speaker:U. S. treasuries, mutual funds, and property.
Speaker:These are all investment markets that, slowly but surely, trend upward.
Speaker:In spite of wide fluctuations, these markets are relatively stable in the long term.
Speaker:These are markets where, if you invest your money in a regular and disciplined way,
Speaker:you are almost guaranteed to find yourself with huge profits in ten or twenty years’ time.
Speaker:Though plenty of speculators do “play” the stock market, speculators tend to be drawn to markets
Speaker:that are less stable, where lots of money can be made (or lost) in a very short amount of time.
Speaker:These kinds of markets are places like options,
Speaker:futures, foreign currencies, startup companies, and cryptocurrencies.
Speaker:These markets are either too new or too volatile to be viable places for investment.
Speaker:The risk involved in any of these markets is extremely high, but speculators are drawn to
Speaker:them because the potential profits to be made are also extremely high (Yeo, 2017).
Speaker:The difference in goal planning is referred to as the investment’s “time horizon."
Speaker:The time horizon is very long, often decades into the future.
Speaker:The time horizon for speculators, on the other hand, is quite short, often less than a year.
Speaker:And the time horizon for gamblers is shortest of all.
Speaker:Gamblers are expecting to win or lose money within the same day, and are rarely
Speaker:doing anything in the way of planning or strategizing for the future (Yeo, 2017).
Speaker:The level of risk is the key difference between the financial styles.
Speaker:Investors have only a moderate risk.
Speaker:There are no guarantees, but the longer the investment schedule,
Speaker:the more stable the investment is, and the lower your risk becomes.
Speaker:Speculators, on the other hand, have a very high risk.
Speaker:They could make a significant profit, but they could also lose everything,
Speaker:and spend a lifetime trying to make back the money that they earned.
Speaker:And gamblers have the highest risk of all.
Speaker:Gambling money is made and lost so quickly, and in such arbitrary ways,
Speaker:that it’s nearly impossible to devise a gambling “strategy."
Speaker:Gamblers are literally betting their security on forces beyond their control.
Speaker:Whether or not they make a profit is left almost entirely up to chance.
Speaker:Introducing Mr. Market and the Market Psychology
Speaker:Investing in the market, without involving your emotions, is key.
Speaker:To help people better understand the financial marketplace,
Speaker:investor Benjamin Graham published an investment guide in 1949 called The Intelligent Investor.
Speaker:In this book, he introduced a character called Mr. Market,
Speaker:which he used as an allegorical tool to represent marketplace fluctuations,
Speaker:and guide investors as to the best way to handle those fluctuations.
Speaker:In his book, Graham asks the reader to imagine that they are the owner of a business.
Speaker:Their partner and co-owner is a man named Mr. Market.
Speaker:This partner is frequently offering to sell his share of the business to the reader,
Speaker:but just as often makes offers to the reader to buy their share.
Speaker:In the allegory, this partner is characterized as having a manic-depressive personality,
Speaker:with mood swings that range from wildly optimistic to toxically pessimistic.
Speaker:The reader is always free to decline Mr. Market’s current offer, as they know that his mood will
Speaker:soon change and a new offer will soon be on the table (Wikipedia Contributors, 2020).
Speaker:Mr. Market is said to be manic-depressive, or what we would today call bipolar.
Speaker:He is emotional, euphoric, and moody, swinging between extremely high highs and equally low lows.
Speaker:He is often irrational, allowing his mood to dictate his business dealings
Speaker:more than any logical guidance or considerations.
Speaker:The transactions that he offers are strictly at your option,
Speaker:meaning that you are free to accept or decline at your convenience, secure in the
Speaker:knowledge that he’ll soon be back with another offer depending on where his moods take him.
Speaker:He is there to serve you, but he is not there to guide you.
Speaker:He has nothing to offer you in the way of advice, and even if he could advise you,
Speaker:his moods are so unpredictable that you would be unwise to trust anything
Speaker:that he had to say (Wikipedia Contributors, 2020).
Speaker:Graham describes him as being a voting machine in the short term,
Speaker:but a weighing machine in the long term.
Speaker:In other words, his short-term decisions are based more on current trends,
Speaker:sociopolitical moods, and popularity than anything financially concrete.
Speaker:On the other hand, his long-term decisions are based more in values and numbers,
Speaker:and though his moods might seem erratic from day to day,
Speaker:they reveal certain patterns when looked at over the course of years.
Speaker:He will sometimes make you savvy business offers,
Speaker:but he will just as frequently give you the option to buy low or sell high.
Speaker:Despite all this unpredictability,
Speaker:you keep him on as a business partner because he is frequently efficient - but not always.
Speaker:At the end of the day, it’s your financial savvy that’s keeping the
Speaker:business afloat (Wikipedia Contributors, 2020).
Speaker:Mr. Market’s mood swings are erratic in the sense
Speaker:that you have no idea when he’ll be feeling up or down.
Speaker:However, they do have a certain predictability, in the sense that you can expect frequent changes.
Speaker:Therefore, you can always wait to buy until Mr.
Speaker:Market is in a low mood and offers you a low sale price.
Speaker:You have the option to buy at that low price,
Speaker:or wait for his next low mood to see if you can get an even better offer.
Speaker:To this end, Graham stresses that patience is the most important
Speaker:quality the reader can have when doing business with Mr. Market.
Speaker:Mr. Market has proved such a useful allegory for explaining investment psychology that it
Speaker:remains a popular teaching tool to this day, about 70 years after Graham published his book.
Speaker:The allegory makes it extremely clear that the only reason for the changes
Speaker:in Mr. Market’s price offerings are his emotions.
Speaker:A rational person, or an intelligent investor, will wait until the price is
Speaker:high before he sells, and wait for the price to fall before he buys.
Speaker:The intelligent investor, however, will not sell because the price is high,
Speaker:nor will they buy because the price is low.
Speaker:There is no need to capitalize on the current situation because you
Speaker:know that same situation will come around again and again.
Speaker:All you need is patience.
Speaker:The ultimate financial decisions should be up to the investor.
Speaker:If you decide you want to sell, you wait for prices to climb.
Speaker:If you decide you want to buy, you wait for the prices to drop.
Speaker:The intelligent investor won’t let the whims of
Speaker:the marketplace influence their financial decisions.
Speaker:Instead, they will wait patiently for the marketplace to offer the right circumstances
Speaker:for them to fulfill their own financial goals (Wikipedia Contributors, 2020).
Speaker:To determine whether or not you want to continue investing in an asset,
Speaker:or sell with the intention of cashing you, Graham advises determining whether the stock valuation
Speaker:of a company is reasonable after the investor calculates its value via fundamental analysis.
Speaker:This might sound complicated, but it’s actually a fairly simple process.
Speaker:Fundamental analysis simply means looking at a business from a big-picture perspective.
Speaker:You don’t just look at the value of the business’s current assets,
Speaker:you also look at its liabilities, earnings, health, competitors, and the state of the market.
Speaker:You consider the company’s worth in the greater context of the economy it belongs to.
Speaker:This will help you determine whether or not it’s a worthwhile investment for you.
Speaker:This is how you determine whether or not a company will continue to make
Speaker:you money as an investor twenty years into the future (Wikipedia Contributors, 2020).
Speaker:Warren Buffett frequently quotes from Graham’s book, and is one of the primary figures
Speaker:responsible for making the Mr. Market analogy a common tool used by investors to this day.
Speaker:It’s a very simple way to express a concept that
Speaker:can be difficult for first-time investors to understand - there
Speaker:is often no rational explanation for why stock market prices rise and fall.
Speaker:There are so many factors at play that contribute to the
Speaker:market’s fluctuations that trying to understand them is pointless.
Speaker:It’s like… well, it’s like working with someone who is severely manic-depressive.
Speaker:Their mood swings are motivated by internal chemistry and personal triggers.
Speaker:They may not always follow any kind of logical or predictable pattern.
Speaker:As such, trying to let market trends guide or influence your investment
Speaker:decisions is like allowing an emotionally unstable person to run your business.
Speaker:The parable of Mr. Market helped Graham to introduce
Speaker:a market concept he called the “margin of safety."
Speaker:The margin of safety is how much risk is involved in a potential investment.
Speaker:The higher the margin of safety, the lower the risk.
Speaker:The lower the margin of safety, the higher the risk.
Speaker:Mr. Market’s mood swings might make an offer seem attractive at the moment,
Speaker:but you, as his partner, must be able to see beyond the price he puts on the table.
Speaker:You have to take a look at what he’s actually offering.
Speaker:If the price is right but the offer is risky,
Speaker:then the margin of safety is too low for it to be a good investment.
Speaker:If, on the other hand, Mr. Market makes a sound offer for too high of a price,
Speaker:then your job is to look ahead into the future.
Speaker:How much value do you stand to make from purchasing now?
Speaker:Can you afford to wait for another change in Mr. Market’s moods,
Speaker:to see if you can get a lower price for the same offer?
Speaker:Remember, there is a big difference between price and value.
Speaker:Benjamin Graham used his Mr. Market analogy to found an
Speaker:entire theory of investing called “value investing."
Speaker:Value investing means waiting to buy stocks or otherwise invest
Speaker:in assets when the stock is worth more than its price on the market.
Speaker:Don’t choose assets based on how they’re priced.
Speaker:Choose assets based on their potential price.
Speaker:To this end, Graham advised reading the financial
Speaker:statements and footnotes of unpopular or neglected companies with low market values.
Speaker:Do these companies have any hidden assets, including investments in other companies,
Speaker:that the market at large may be neglecting at this moment?
Speaker:What is the potential for growth that these companies have?
Speaker:Do you see this company making money ten years into the future?
Speaker:What about twenty?
Speaker:Just because the company is undervalued now means nothing.
Speaker:Eventually, the market will see what you see, and when the market prices go up,
Speaker:you’ll start seeing huge returns on your initial investments (Wikipedia Contributors, 2020).
Speaker:This mentality is the secret to good, defensive investing.
Speaker:The more you start to view the stock market through the personality of Mr. Market,
Speaker:the less emotionally susceptible you will be to its constant and erratic changes.
Speaker:Rather than obsessively watching the stock market reports every day,
Speaker:you’ll be able to maintain a cool, emotional distance when making your
Speaker:investment schedules and choosing the best asset in which to invest your money.
Speaker:The Mr. Market analogy has been helping investors for decades
Speaker:to protect themselves from “emotional bias."
Speaker:This is what happens when our emotions initiate a shift in our perceptions,
Speaker:causing us to view situations in a way that affects our decisions making.
Speaker:Emotional bias can cause us to look at neutral events from a negative perspective,
Speaker:or to believe that something is positive even when there is objective evidence to the contrary.
Speaker:Emotional bias can make it very difficult for us to accept hard facts, especially when those
Speaker:facts are unpleasant or give evidence to a reality that we don’t want to accept.
Speaker:Emotional bias causes us to behave like Mr. Market.
Speaker:It causes us to make risky decisions out of excitement,
Speaker:and miss solid investment opportunities out of fear.
Speaker:When we make too much of the market’s senseless fluctuations,
Speaker:we allow our dreams, hopes, and fears to interfere
Speaker:with our ability to make sound financial decisions (Wikipedia Contributors, 2020).
Speaker:Intelligent investors don’t need to keep on top of market trends because
Speaker:they understand that that’s all they are - trends.
Speaker:Lows will become highs, which will become lows again.
Speaker:The only winning game in the investment world is the long-game.
Speaker:The more time you can sink into an asset, the more money you will make,
Speaker:regardless of the size of your investments.
Speaker:The trick, however, is to dedicate that time to an asset that is stable, reliable, and low-risk.
Speaker:This has been the Timeless Investment Strategy.
Speaker:Everything you need to start making money in the stock market today.
Speaker:Investpreneurs Book 1.
Speaker:Written by Bill Grand. Narrated by Russell Newton.
Speaker:Copyright 2020 by Investpreneurs.
Speaker:Production Copyright by Investpreneurs.
