Benjamin Graham addressed the differences between investing and speculation on the very first page of his book The Intelligent Investor: “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
This still rings true today. Yet, with my contemporary perspective, I add two more criteria that define speculation:
- Any contemplated holding period shorter than a normal business cycle (typically three to five years)
..................
- Any purchase based solely on anticipated market movements
Related previous posts:
Graham and Dodd on the ‘Relation of the Future to Investment and Speculation’
Warren Buffett on investment, speculation, and gambling
James Grant quote