# Lifestyles & Discussion > Personal Prosperity >  At this point, stocks better investment or gold?

## moderate libertarian

For 5-10 year horizon.  
Many people lately see gold as a good investment but at these prices does it still make  sense to buy gold? 
In any case, appreciate your view on what you think is the safe investment in current economic environment.

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## cubical

It can be both. I have about half my portfolio in gold bullion and gold miners(and silver) the rest is in foreign and/or energy related stocks. I am researching MLPs as I believe they are probably the best investment out there for the long term, though they are near all time highs and I would wait before entering.

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## nejar462

Both are stronger together. Gold and stocks will give you good diversification and protection for the future. For investments you don't need to pick one or the other, diversify!

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## moderate libertarian

Thank you both for your ideas.
MLP I had no clue about and just googled. Interesting option, will have to look into it as I'm new to it.

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## Seraphim

Both:

Gold/silver as long term cash savings (instead of currency and bonds).

Stocks for growth and productive value.

Peace.




> Both are stronger together. Gold and stocks will give you good diversification and protection for the future. For investments you don't need to pick one or the other, diversify!

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## DamianTV

for the 10 year horizon, GOLD GOLD GOLD.  The Stock Market as we know it will be a thing of the past by then, probably starting this year, with the Debt Ceiling.

---

Edit:

I mean Physical Gold.  Gold Bullion.  Gold Coins.  Gold Gold.  No Stock Market Bull$#@!.  If you havent learned your lesson from the Fiat Dollar, a Stock in Gold is no different than Fiat Paper Money.  $#@! the laws and rules and regultions.  When (not if, when) the $#@! hits the fan, which I suspect will be well before Dec 21st, 2012, you'll be glad you have real actual physical gold, unlike me.

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## jds8288

This is a good question. My favorite source for this sort of thing is the geopolitical and economics expert Richard Maybury. He's the author of "Whatever Happened to Penny Candy" an amazing yet simple book on free market economics and he also authors the newsletter Early Warning Report.

Two years ago I was looking to do some investing in precious metals and he produced a video series on "Buying Precious Metals" at just the right time: http://www.youtube.com/user/RichardM...14/K5qrKVASvEw

Here's a summary though:
He estimates that Gold is very likely to exceed $3000/oz, silver $50/oz (Early Warning Report sample issue on earlywarningreport.com)
Don't put all your eggs in one basket (basic investment advice). 10% into precious metals is his advice but I felt comfortable with more than that
Buy the REAL thing

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## Danke

> Don't put all your eggs in one basket (basic investment advice). 10% into precious metals is his advice but I felt comfortable with more than that
> Buy the REAL thing


What does he do with the other 90%?

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## jds8288

> What does he do with the other 90%?


Well for myself I ended up doing about 40% gold/silver

But for the rest? Whatever seems like a good investment to you. I'd put it in strong companies in an industry you are very familiar with. But that's just me. You could do land, mutual fund, stocks, foreign currency, commodities, bonds, CDs (ha, I wouldn't), whatever you want.

Basically I would be take the approach of (and I think it's a pretty reasonable one) what if one of your investments went to 0 - what would your portfolio look like? And then build around that. Obviously we don't expect gold to plummet but if it did you're SOL. But if gold doubles or triples and it's 20% of your portfolio you're doing really, really well. Even if the bottom falls out of the dollar you'll still be set pretty good because guess what most people don't have? Gold and silver. Precious metals are also pretty volatile so that's a very good reason for not putting a huge chunk of your assets in them.

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## Carson

That is a real tough question. 

With all of the volatility in the business sector I would think gold and silver will still be gold and silver no matter how things go.

I suppose with things changing there could be a chance of seeing it through owning a business that is still in business and make a killing. The thing is though that there are people that have the ability to create what ever amount of money it takes to take it away from  you.

I remember a story about Hostess and the way their parent company was able to get to be such a popular brand off bread.

The story went that all over the country, and I imagine the world for that matter, that every town had a bakery or more baking bread for the local market. Hostess was able to move into the town, set up and sell bread at a price that would eventually under-price the local people and drive them out of business. They had a lot of money and could afford to do it. Then they could charge what ever the market would bear. Then they would move on to another town. 

Here is how the stock market has been running. Might I point out that when the value of the dollar drops in half it takes twice as much to purchase the same amount of stock. It can be exhilarating owning it and watching it go up. Until you've let the government cut itself in with the capital gains tax and then look back and see it was false profits created by the illusion of inflation.

While your at it check out on the chart where you were when you started working without any experience and look now how, even though you've gotten raises over the years you make less than when you started.


http://oregonstate.edu/cla/polisci/sahr



Silver and Gold calculator.

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## Teaser Rate

Gold is not an investment, it's a hedge. Putting anything more than ~10% of your portfolio in gold is pointless unless you believe that the dollar is about to crash.

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## MJU1983

> Gold is not an investment, it's a hedge. Putting anything more than ~10% of your portfolio in gold is pointless unless you believe that the dollar is about to crash.


Thanks to the Fed it seems to be a pretty decent investment as of late.

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## Carson

> Thanks to the Fed it seems to be a pretty decent investment as of late.


Train wreck in slow motion. 

Hindenburging into the future.

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## Danke

> Well for myself I ended up doing about 40% gold/silver


Not my question.  Was wonder what your so-called "geopolitical and economics expert" Richard Maybury did/does.

10% gave me the  lol.




> Gold is not an investment, it's a hedge. Putting anything more than ~10% of your portfolio in gold is pointless unless you believe that the dollar is about to crash.


LOL




>

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## RonPaulGetsIt

gold better...just watch the dow/gold ratio until it falls back to 1:1.

1 to 1 in 1980 when gold peaked, dow bottomed...both around 850.

hit about 44 to 1 in 2000 when gold bottomed about 250, dow 11000.

It has been on a slow march lower since and should continue to 2:1 at a minimum from its current 7-8 ish to 1.

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## Teaser Rate

> LOL


That fact that something goes up or down in value does not mean it's an investment. Is wheat an investment? Is rice? Is sugar? 

An investment is money placed into something which will generate revenue later on. Gold derives most of its value from speculation, and like overpriced houses during the last bubble, its value will come back down once the market realizes that.

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## Danke

> That fact that something goes up or down in value does not mean it's an investment. Is wheat an investment? Is rice? Is sugar? 
> 
> An investment is money placed into something which will generate revenue later on. Gold derives most of its value from speculation, and like overpriced houses during the last bubble, its value will come back down once the market realizes that.


$250 to $1600 in ten years while the S&P 500 has been flat.   Ya, poor investment.

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## Carson

> That fact that something goes up or down in value does not mean it's an investment. Is wheat an investment? Is rice? Is sugar? 
> 
> An investment is money placed into something which will generate revenue later on. Gold derives most of its value from speculation, and like overpriced houses during the last bubble, its value will come back down once the market realizes that.


"First you get the sugar, then you get the power, then you get the women"

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## Fermli

> "First you get the sugar, then you get the power, then you get the women"


ahaha i can't stop laughing.

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## jds8288

> Not my question.  Was wonder what your so-called "geopolitical and economics expert" Richard Maybury did/does.
> 
> 10% gave me the  lol.


He's not a "so-called" expert. He's just not well known. Ron Paul is a subscriber of "Early Warning Report". You should really read the sample issue  

But since you ask about what would Early Warning Report suggest for an investment: the answer is I don't know. I don't have $150/yr to spend on it. But if I was regularly investing I sure would. 

However, his Track Record gives a pretty good indicator 

and a major part of his recommendation is Permanent Portfolio (PRPFX) which has clearly done very well since inception.

Based on your slight scoffing about the 10% in gold I'm guessing you'd prefer 100%? I haven't figured out what your angle is yet.




> $250 to $1600 in ten years while the S&P 500 has been flat. Ya, poor investment.


Why the focus on s&p vs gold? Silver has increased at a higher %. Also you can invest in stocks and do better than indexes (s&p, nasdaq, dj).

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## cubical

> Based on your slight scoffing about the 10% in gold I'm guessing you'd prefer 100%? I haven't figured out what your angle is yet.


There is middle ground you know. Doesn't have to be one extreme or the other.

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## Danke

> and a major part of his recommendation is Permanent Portfolio (PRPFX) which has clearly done very well since inception.
> 
> ...
> Why the focus on s&p vs gold? Silver has increased at a higher %. Also you can invest in stocks and do better than indexes (s&p, nasdaq, dj).


According to his website, PRPFX went from around 10 to 50 in 30 years.

The Dow went from <1000 to over 12,000 now.


If you're good at picking individual stocks, the more power to ya.  Not many are.

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## jds8288

> According to his website, PRPFX went from around 10 to 50 in 30 years.
> 
> The Dow went from <1000 to over 12,000 now.
> 
> 
> If you're good at picking individual stocks, the more power to ya.  Not many are.


You're right, it does show that. I guess I assumed that Google Finance and others would show "since inception" when I chose the "all" time frame but it just shows since the year 2000. Also Early Warning report started recommending it in 2001. So if we compare apples to apples over last 10 years (for investing $10,000):

Dow: $11,990
Nasdaq: $14,087
S&P 500: $11,108
Permanent Portfolio : $27,401
Gold: $51,613
Silver: $93,457
Lockheed Martin: $21,232
Google (since IPO in 2004): $57,079

Looking at that you may say "OMG I should've invested in gold and silver" and in part, yes. But they're so volatile that a large % would be so, so dangerous. Permanent Portfolio, for example, still triples your money but is quite stable (just look at it's chart and notice how it did in the 2008 crash). Just some food for thought.

I put Lockheed Martin on there because of individual stocks and one of Richard Maybury's basic strategies (read the book "The Clipper Ship Strategy") which basically says: if government is going to be this giant, ugly redistribution animal and take from Peter to give to Paul we might as well still do the very best we can with growing our money. So, you invest in the companies that will be growing from government purchases/hot spots. And that's where the geopolitics comes in. Being able to forecast where the government will put its money. And for the last 10 years that has mostly been in the military industrial complex.

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## FlatIron

I prefer energy stocks. Oil is slowly being used less, but their is still high enough demand to keep investing in it for the next 10 years.

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## Brian4Liberty

Gold/Silver are the safest bet. My real fear is another big market crash that will even take metal prices down as people are forced to raise cash. Obviously gold will recover over time, but it's tough to ride out a crash.

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## Seraphim

Unless you're MO is long term accumulation - if that is the case, a market wide deflationary crash is a rare opportunity to buy when everything IS ON SALE.

Bring on the sales, I say.




> Gold/Silver are the safest bet. My real fear is another big market crash that will even take metal prices down as people are forced to raise cash. Obviously gold will recover over time, but it's tough to ride out a crash.

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## JasonC

I only have about 2k in a Scottrade account plus about 2k in physical PMs, mostly all silver. With such a small amount, I have to take risks to make big gains, so I am currently in one silver/copper miner (RVM which I recommend highly) and one gold miner. I've been sticking with all commodities related investments  and started with only 700 and have even taken out 1k (nearly 300% since the end of 2008). If I had more money, though, I would be following the strategies already discussed in this thread with about a ten percent allocation of PMs or higher depending on your risk tolerance.

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## Warrior_of_Freedom

the best investments are emergency food, seeds, water filters, solar panels and guns

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## Brian4Liberty

> Unless you're MO is long term accumulation - if that is the case, a market wide deflationary crash is a rare opportunity to buy when everything IS ON SALE.
> 
> Bring on the sales, I say.


Absolutely a buying opportunity. But you have to have the cash, and you can't be fully invested when that crash happens.

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## moderate libertarian

Thanks to everyone for their input, very interesting perspectives to learn from.

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## xd9fan

> Gold/silver as long term cash savings (instead of currency and bonds).
> 
> Stocks for growth and productive value.
> 
> Peace.


this.
great post!

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## xd9fan

> Gold is not an investment, it's a hedge. Putting anything more than ~10% of your portfolio in gold is pointless unless you believe that the dollar is about to crash.


Teaser are you a$$-backwards........flip your percentages around.......okay the kool-aid is still being passed around....

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## Brian4Liberty

> Gold/Silver are the safest bet. My real fear is another big market crash that will even take metal prices down as people are forced to raise cash. Obviously gold will recover over time, but it's tough to ride out a crash.





> Unless you're MO is long term accumulation - if that is the case, a market wide deflationary crash is a rare opportunity to buy when everything IS ON SALE.
> 
> Bring on the sales, I say.


Sales coming right up. 

Actually, we probably have a way to go on the downside. Best buying op may be in the October-December range.

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## helmuth_hubener

> With such a small amount, I have to take risks to make big gains


 Uh huh.   How did this turn out for you, Jason?

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## buenijo

In my opinion, gold or silver should not be considered as an investment. I think it's good as a means for long term savings. One should not purchase gold or silver hoping for significant appreciation of its purchasing power - this is not investing, this is speculating. 

My view on stocks is that the stock market is volatile and risky. There are many signs that stocks in general are overvalued. With the very low dividends generally available, then purchasing stocks today could not properly be called investing. If you're purchasing stocks hoping for price appreciation, then this is not investing - it is speculating. 

The best investment I suggest today is to learn marketable or otherwise useful skills and/or start your own business.

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## Seraphim

The "stock market" is not the same as equity in companies. It's kind of like lumping a bad company in with the rest and saying "capitalism/free markets are bad!!".

Doing a broad investment plan in the DJIA, NYSE, TSX etc. is monumentally different then hand picking a company and investing (buying stock).

Publically traded companies/indexes are so very different than private equity.

If you hold stock in a truly productive company - what the value of fiat does is irrelevent. The USD could burn to ash but if you own private equity in a 200 old Scotch distillery or a farming company with strong fundementals, a broad public stock market crash is irrelevant to you.




> for the 10 year horizon, GOLD GOLD GOLD.  The Stock Market as we know it will be a thing of the past by then, probably starting this year, with the Debt Ceiling.
> 
> ---
> 
> Edit:
> 
> I mean Physical Gold.  Gold Bullion.  Gold Coins.  Gold Gold. * No Stock Market Bull$#@!*.  If you havent learned your lesson from the Fiat Dollar, a Stock in Gold is no different than Fiat Paper Money.  $#@! the laws and rules and regultions.  When (not if, when) the $#@! hits the fan, which I suspect will be well before Dec 21st, 2012, you'll be glad you have real actual physical gold, unlike me.

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## Seraphim

Investing is putting money into an asset with the expectation of a return. By it's very nature it is speculative (at least partially).

I agree that gold is more of a long term retainer of value/purshasing power, but it does have investment properties. Silver has even more investment potential/properties. 




> In my opinion, gold or silver should not be considered as an investment. I think it's good as a means for long term savings. One should not purchase gold or silver hoping for significant appreciation of its purchasing power - this is not investing, this is speculating. 
> 
> My view on stocks is that the stock market is volatile and risky. There are many signs that stocks in general are overvalued. With the very low dividends generally available, then purchasing stocks today could not properly be called investing. If you're purchasing stocks hoping for price appreciation, then this is not investing - it is speculating. 
> 
> The best investment I suggest today is to learn marketable or otherwise useful skills and/or start your own business.

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## helmuth_hubener

> XYZ should not be considered as an investment.
> ...
> ABC could not properly be called investing. 
> 
> If you're purchasing stocks hoping for price appreciation, then this is not investing - it is speculating.





> Investing is putting money into an asset with the expectation of a return. By it's very nature it is speculative (at least partially).


Here is how I define investing and how I distinguish investing from speculating:

*Investing* is when you accept the rate of return on the market that *anyone* can get.  Any Schmoe.  You.  Merrill Lynch.  Joe.  Your cat.  Anyone can get this rate of return with no special knowledge nor training.

*Speculating* is when you try to beat the rate of return available on the market.

That gives the two terms good, solid, non-subjective definitions.  Instead of just being fuzzy and subjective.  What do you guys think?

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## buenijo

> Here is how I define investing and how I distinguish investing from speculating:
> 
> *Investing* is when you accept the rate of return on the market that *anyone* can get.  Any Schmoe.  You.  Merrill Lynch.  Joe.  Your cat.  Anyone can get this rate of return with no special knowledge nor training.
> 
> *Speculating* is when you try to beat the rate of return available on the market.
> 
> That gives the two terms good, solid, non-subjective definitions.  Instead of just being fuzzy and subjective.  What do you guys think?


I thinks it's good, and I appreciate a clear definition. It doesn't matter so much what the definitions are so much as we are all using the same ones. Otherwise, we may as well be trying to communicate in different languages.

When I wrote _speculating_, I mean specifically _speculating on price appreciation_. This is what went on during the housing bubble - and generally characterizes all bubbles. A healthy stock market should show a stable price index. Appreciation in a price index is a symptom of currency expansion. I believe purchasing stocks hoping for yields based on price appreciation should be distinguished from the historical practice of yielding a return from dividends. A good argument can be made that "investing" in this environment must be done with price appreciation as a primary goal. However, I then wonder, is genuine investment possible in this environment where capital on net balance is likely being destroyed? That's a tough one.

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## Seraphim

You have your definitions mixed up.

An investment is anything you park money into with the _expected_ notion that you will get a real return above the real inflation rate.

You can be a pure speculator parking money in US Treasuries - perceived as the least speculative "investment" one can make.

In fact, these days, most people invested in government bonds of the "strong" governments are classic examples of speculators. The speculation is that both the principal and the paltry 2.4% yield are safe and a sure thing.

ANY expected return on capital is an investment. From there, the degree of speculation has to do with fundamentals and the expected result.

A gold investor from 2008 who thinks by 2020 the gold will be 1250% higher in USD but only 15% higher in purchasing power has little overall speculation relative to general market expectations of return.

Fiat screws things up. Real rates of return are the only things that matter. Since the government and central banks OPENLY target inflation, EVERYTHING is a speculation. Period. End of story. Speculation/investment become synonymous by default and they then become a matter of degree, risk and true outcome.




> Here is how I define investing and how I distinguish investing from speculating:
> 
> *Investing* is when you accept the rate of return on the market that *anyone* can get.  Any Schmoe.  You.  Merrill Lynch.  Joe.  Your cat.  Anyone can get this rate of return with no special knowledge nor training.
> 
> *Speculating* is when you try to beat the rate of return available on the market.
> 
> That gives the two terms good, solid, non-subjective definitions.  Instead of just being fuzzy and subjective.  What do you guys think?

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## Zippyjuan

In a financial sense, "speculating" usually means taking on very high risk. "Investing" (trying to get some sort of return on your money) can include speculating.

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## oyarde

> For 5-10 year horizon.  
> Many people lately see gold as a good investment but at these prices does it still make  sense to buy gold? 
> In any case, appreciate your view on what you think is the safe investment in current economic environment.


Well , gold is no bargain now , but has been in the past  , as early as 7 months ago , most likely , an avg stock is crap , I still bought some , but not what you will normally see as suggestions .

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## Schifference

No one has mentioned BTC here. Does Bitcoin deserve any portion of a portfolio?

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## helmuth_hubener

> I thinks it's good, and I appreciate a clear definition. It doesn't matter so much what the definitions are so much as we are all using the same ones. Otherwise, we may as well be trying to communicate in different languages.


 Hey thanks, and yes, I agree about definitions.




> When I wrote _speculating_, I mean specifically _speculating on price appreciation_. This is what went on during the housing bubble - and generally characterizes all bubbles.


  But if you're invested in a broad asset category -- let's use real estate, since that's the example you are using here -- you are not going to do any better than all the other millions of people invested in it, but _neither will you do any worse!_  And that's really important.  So if you want to *invest* in real estate, the way to do it would be to buy into large, established REIT index funds.  Then you can get whatever kind of performance or characteristics which are found in real estate (for instance, generally doing well during periods of moderately inflationary prosperity) which are important to you as an investor.

If you, on the other hand, bought an individual piece of property with the expectation of outperforming the real estate market in general, you would be *speculating*.  This is like the practice of hand-picking stocks that Seraphim is a fan of.  Because you have done your homework, done the research, found a good deal, etc., you think you can do better than some ignorant Joe the Plumber just plunking down in a simple REIT index.  The upside to doing things this way is that you can do better than the market as a whole.  _The downside -- almost always ignored! -- to doing things this way is that you can do much worse than the market as a whole._




> A healthy stock market should show a stable price index. Appreciation in a price index is a symptom of currency expansion. I believe purchasing stocks hoping for yields based on price appreciation should be distinguished from the historical practice of yielding a return from dividends. A good argument can be made that "investing" in this environment must be done with price appreciation as a primary goal. However, I then wonder, is genuine investment possible in this environment where capital on net balance is likely being destroyed? That's a tough one.


 One big factor exerting downward pressure on dividends is US taxation policy.  As a taxable investor, it is much better from a tax point of view to get the long-term price appreciation than to be getting paid dividends every year which you must turn around and pay taxes on.  So people and businesses have figured this out.  If I can get the same return one way or another way, I will choose the way where I don't have to pay Uncle Sam as much.

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## helmuth_hubener

> In a financial sense, "speculating" usually means taking on very high risk. "Investing" (trying to get some sort of return on your money) can include speculating.


Yes, and what does that even mean?  What is a "very high risk"?  Can you define it for me?  Can anyone?

Investment gurus throw around these terms like they mean something, to create the impression that something has actually been said.  When in reality, it hasn't.

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## helmuth_hubener

> You have your definitions mixed up.


  That is certainly possible!  This is a case where the words themselves -- investing, speculating -- do not necessarily have clear, useful definitions which are widely accepted.  And so I have chosen to define them in a way which _is_  clear and which is _highly useful_ to _me_.

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## Zippyjuan

> Yes, and what does that even mean?  What is a "very high risk"?  Can you define it for me?  Can anyone?
> 
> Investment gurus throw around these terms like they mean something, to create the impression that something has actually been said.  When in reality, it hasn't.


Risk can be mathematically measured.  While it is not a guarantee of what can happen in the future, they look at how often in the past you would have made/ lost money from a particular type of investment. The less often you made money in the past, the higher the risk against making money in the future.  Bonds (when held to maturity) have a guaranteed return (unless they default) while things like commodities or "junk bonds" for example are more volitile and have a lower chance of a positive return in the future.  In order to be willing to take on riskier investments, investors usually want the promise of a higher return if things do work out (such as higher interest rates that junk bonds have to offer vs the interest rate on US Treasury bonds which have a much lower risk of default- not getting paid). 

Risk is relative- true I cannot give you an absolute number above which always means "high risk".  But that does not mean there is no such thing.  Jumping off a bridge is high risk.  Sleeping in your bed also carries risk of death but that is a much rarer event so it is considerably lower risk activity.

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## helmuth_hubener

> Risk can be mathematically measured.


Oh really?  You are just full of revelations.  What is the mathematical risk that the stock market will crash by at least 15% this year?  Can you tell me?  No?

*Can you tell me the mathematical risk of any event that would be useful to me in investing?*

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## Zippyjuan

I haven't made such calculations myself so I can't say what they are but others have. Diffferent people will have different risks they are more concerned about so they may come up with different relative risks for things. A thrill seeker may find jumping off a bridge a sane and fun activity and spending all day in bed a waste of time.  A thrill adverse person would rather stay in bed. 

Sample: http://www.stocktradingtogo.com/2009...le-volatility/




> *5 Ways to Measure Investment Risk*
> 
> Most of these articles have dealt with how investors make decisions about which assets to buy and when to sell them. Financial theory tells us that we should aim to create portfolios whereby we maximize gains for a set level of risk. This is easy to understand, but it leaves open one general question—how do we define risk?
> 
> Finance literature largely describes risk as volatility of returns. Based on my experience, I find this definition inadequate. When markets are moving higher and people are making money, risk is often discarded. After all, many people say they would rather make a rocky 20% than a predictable 5%. However, when prices fall investors take the opposite view and huddle in the corner wishing to not lose another dime.


More at link.

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## helmuth_hubener

> I haven't made such calculations myself so I can't say what they are but others have.


They might as well be looking at crystal balls.  I asked:

*Can you tell me the mathematical risk of any event that would be useful to me in investing?* 

You can give me no such number, because there is no such number.  It's unknown.

This is not mathematics.  You can measure all kinds of things in the past.  Yes.  But you know what?

"it is not a guarantee of what can happen in the future"

I can tell you what the volatility numbers were for the US stock market 1922-2013.  But I cannot tell you what the "risk" number is of anything.  There are no such numbers.  People sometimes _make up_ numbers relating to risk, such as probabilities that various things will happen.  These are just made-up.  They don't know.  Nobody knows.  It's an art, not a science.

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## Zippyjuan

Risk is calculated all of the time.  Insurance companies are big calculators of risk.  They want to know the odds that they are going to have to make a payout and how big it is likely to be so they know how much they need to charge in premiums so they make money over and above what they have to pay out. They aren't going to "just make things up". They are placing a bet that you will give them more money in premiums than they have to give back to you in payouts and they want to hedge that bet as well as they can by looking at how risky you are (how likely you get a payment from them).  If they make the wrong choice on risk, the go out of business. 

If you borrow from a bank, the assess your risk of paying them back.  They look at your job history and credit history.  If you are not as good at paying your bills as somebody else, they will charge you a higher rate- a "risk premium" than somebody with a better record of making payments. 

 Different bonds and loans have different interest rates.  Why? Investors see different risks that they will get paid back by the person they lent the money to (the bond issuer).  Same for loans to individuals and companies. A "risk factor" is applied.  Higher risk of getting the money back means you need a bigger return so that if you do lose money on one going bad, you can make up the difference on the ones which do pay you off.  Yes, it is mathematics. 

You may not crunch numbers but you yourself make risk calculations all of the time.  You choose between different investments. Why pick one over the other?  Because you feel one offers a better chance at a decent return than another (or a lower risk of losing money on it).

Measuring risk is trying to calculate the odds of something happening- good or bad.

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## helmuth_hubener

I am not rejecting the concept of risk.

I am objecting to you writing, quote: "In a financial sense, "speculating" usually means taking on very high risk," as if that means something.

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## Zippyjuan

Was your objection to the "very high" part?  Perhaps "higher risk" would have been better?  

Though you did argue that you cannot measure risk. 



> Can you tell me the mathematical risk of any event that would be useful to me in investing? 
> 
> You can give me no such number, because there is no such number. It's unknown.
> 
> This is not mathematics.


If not, perhaps you can elaborate more on what your objection was. Thanks.

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## helmuth_hubener

What you wrote is just very subjective and meaningless.  What is a "very high risk"? Can you define it for me? Can anyone?

Higher risk would be better, but only if you also answer higher _than what?_  Otherwise it is likewise meaningless and useless.

You are throwing around these terms like they mean something, to create the impression that something has actually been said. When in reality, it hasn't.  Your post said absolutely nothing that told me anything of any value, in my humble opinion.  I read your post, asking myself "what can I learn from this that will help me in investing?" and I come up with nothing.

So my question is, what's the take-away, Zippy?  What's the solid advice?  Where's the beef?

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## Zippyjuan

I made no suggestions as to what you want to invest in- you make those decisions. I also don't have to tell you any number of what a risk is- you are making those calculations yourself (even if you don't run the numbers you are still weighing relative risks).  If you feel something has too high of a risk, you don't invest in it. Some people like higher risk because it offers the potential for higher returns if it pays off- along with more risk of losing on it. Some are risk adverse and want to be as safe as they can be with their investments.  Most combine different levels of risk. 

You offered a definition of speculation- what does that tell you you should or should not invest in?  Where is your solid advice? 




> Speculating is when you try to beat the rate of return available on the market.


But thank you for better explaining what your real concern was in my post.

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## helmuth_hubener

> Where is your solid advice?


 No one asked for it (on this thread).  Do _you_ actually want any? No.

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## Zippyjuan

I see.  You would like some investment advice from me since you are upset that my definition did not include any (yours did not either).  Sorry to disappoint. It was not intended to be included. 




> I read your post, asking myself "*what can I learn from this that will help me in investing*?" and I come up with nothing.
> 
> So my question is, what's the take-away, Zippy? *What's the solid advice?* Where's the beef?


But if you did want some advice, I might suggest an index fund- pick your own category. They offer the lowest cost investments.  Higher costs lower returns.  Since a market is the sum of all investors, the average investor will get the market average return.  But when you include costs (transaction costs, taxes, fees, etc), the average investor actually will do worse than the market average. The higher the costs, the farther below the market average return you fall.  I also like dividend paying stocks like utilities with steady payouts.  Guaranteed (as much as they can be guaranteed) returns in addition to any appreciation in the share prices.  In that case, get a DRIP fund (Dividend Re-Investment Plan).  DRIPS are the lowest cost investments. The money it gets in the form of a dividend are rolled over into buying more shares at little to no additional costs (costs of purchasing additional shares are also typically extremely low too- but they can vary by the individual stocks- read the facts on them before investing).

Or you can speculate and take on higher risks with the hopes of beating the market average (which is impossible for the average investor to do).  It is very difficult to consistantly beat the market average.

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## helmuth_hubener

> I see.  You would like some investment advice from me since you are upset that my definition did not include any (yours did not either).  Sorry to disappoint.


 No, Zippyjuan, I merely wanted to politely point out that your statement was vacuous.  Mission accomplished.





> But if you did want some advice, I might suggest an index fund- pick your own category. They offer the lowest cost investments.  Higher costs lower returns.  Since a market is the sum of all investors, the average investor will get the market average return.  But when you include costs (transaction costs, taxes, fees, etc), the average investor actually will do worse than the market average. The higher the costs, the farther below the market average return you fall.
> 
> Or you can speculate and take on higher risks with the hopes of beating the market average (which is impossible for the average investor to do).  It is very difficult to consistantly beat the market average.


 This is excellent advice, and is, of course, the very advice implied in my contrasting definitions of speculating and investing.  You would know this if you ever read any of my many, many posts on the topic.  Also if you had any interest whatsoever in mutual _understanding_ and actual _communication_.  However, I have never observed you to show the least bit of interest in what anyone else on this forum thinks.  Not once.

Why is that?

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