Know the Difference Between Investing and Speculating

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Here are some big winners so far in 2017 as published in the Wall Street Journal a couple days ago. So if you own any of these what should you do? Buy more, sell a little, sell it all? If you don’t own them should you buy now?

I have written in the past explaining speculating and investing and this is where you need to understand the difference. I believe the majority of your money should be used for “investments” and only a small percentage of your net worth should be used for “speculation” because you shouldn’t speculate on your retirement or other financial goals.

In my opinion any single investment, whether it be one Bitcoin or a single stock position, carries a lot of risk, even for a great company like Amazon. I prefer to diversify single company exposure away through the use of Exchange Traded Funds (ETFs), so instead of owning Amazon outright, I own it through the iShares Russell 1000 ETF (IWB). That way if Amazon loses value, I still own 976 other companies in the ETF that may offset that loss. This will absolutely limit your gains and this won’t make you rich and able to retire young, but it will keep you from going broke.

However if you choose to invest/speculate, you just want to tread carefully after huge gains in any investment. As we have seen in the past, the current biggest winners can end up being the losers in the future.

If you haven’t put together an investment strategy you should contact your CERTIFIED FINANCIAL PLANNER™ to get started immediately.[/vc_column_text][/vc_column][/vc_row]